repare 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).) Make Buy Net Income Increase (Decrease) Direct materials $ $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $ $ $ Wilma Company will [ incur $ ??? ]of additional costs if it the switches.
repare 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).) Make Buy Net Income Increase (Decrease) Direct materials $ $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $ $ $ Wilma Company will [ incur $ ??? ]of additional costs if it the switches.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter11: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...
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Question
Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows.
Instead of making the switches at an average cost of $2.95 ($177,000 ÷ 60,000), the company has an opportunity to buy the switches at $2.7 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
| Direct materials | $30,000 | Variable |
$45,000 | ||||
| Direct labor | $42,000 | Fixed overhead | $60,000 |
Instead of making the switches at an average cost of $2.95 ($177,000 ÷ 60,000), the company has an opportunity to buy the switches at $2.7 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).)
| Make | Buy | Net Income Increase (Decrease) |
|||||
| Direct materials | $ | $ | $ | ||||
| Direct labor | |||||||
| Variable |
|||||||
| Fixed manufacturing costs | |||||||
| Purchase price | |||||||
| Total cost | $ | $ | $ |
| Wilma Company will [ incur $ ??? ]of additional costs if it the switches. |
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