Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $36 per unit. A proposal is offered to purchase small bottles from an outside source for $98 per unit, plus $12 per unit for freight. a. Prepare a differential analysis dated January 25 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) January 25 Make Bottles Buy Bottles Differential Effect (Alternative 1) (Alternative 2) (Alternative 2) Unit costs: Purchase price X X X Freight X x x Variable costs Fixed factory overhead X x x x X Total unit costs x X b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles. Buy the bottles
Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $36 per unit. A proposal is offered to purchase small bottles from an outside source for $98 per unit, plus $12 per unit for freight. a. Prepare a differential analysis dated January 25 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) January 25 Make Bottles Buy Bottles Differential Effect (Alternative 1) (Alternative 2) (Alternative 2) Unit costs: Purchase price X X X Freight X x x Variable costs Fixed factory overhead X x x x X Total unit costs x X b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles. Buy the bottles
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Make or Buy
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles),
including fixed costs of $36 per unit. A proposal is offered to purchase small bottles from an outside source for $98 per unit, plus $12 per unit for freight.
a. Prepare a differential analysis dated January 25 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles,
assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0".
Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
January 25
Make
Bottles
Buy
Bottles
Differential
Effect
(Alternative 1) (Alternative 2) (Alternative 2)
Unit costs:
Purchase price
X
X
X
Freight
X
x
x
Variable costs
Fixed factory overhead
X
x
x
x
X
Total unit costs
x
X
b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
Buy the bottles
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