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Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Wilma Company must decide whether to make or buy some of its components. The costs of producing 64,400 switches for its generators are as follows. Direct materials $29,200 Variable overhead $45,600 Direct labor $31,404 Fixed overhead $81,200 Instead of making the switches at an average cost of $2.91 ($187,404 ÷ 64,400), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) Direct materials $4 $4 $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $4 $1 Wilma Company will incur $ of additional costs if it the switches.
Transcribed Image Text:Wilma Company must decide whether to make or buy some of its components. The costs of producing 64,400 switches for its generators are as follows. Direct materials $29,200 Variable overhead $45,600 Direct labor $31,404 Fixed overhead $81,200 Instead of making the switches at an average cost of $2.91 ($187,404 ÷ 64,400), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) Direct materials $4 $4 $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $4 $1 Wilma Company will incur $ of additional costs if it the switches.
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