Sunland Company must decide whether to make or buy some of its components. The costs of producing 67,200 switches for its generators are as follows. Direct materials Direct labor (a) $31,000 $44,484 Variable overhead Fixed overhead Instead of making the switches at an average cost of $2.97 ($199,584 +67,200), the company has an opportunity to buy the switches at $2.75 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Direct materials 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 eg.-45 or parentheses eg. (45).) $44,900 $79,200 IA Make Buy $ Net Income Increase (Decrease)
Sunland Company must decide whether to make or buy some of its components. The costs of producing 67,200 switches for its generators are as follows. Direct materials Direct labor (a) $31,000 $44,484 Variable overhead Fixed overhead Instead of making the switches at an average cost of $2.97 ($199,584 +67,200), the company has an opportunity to buy the switches at $2.75 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Direct materials 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 eg.-45 or parentheses eg. (45).) $44,900 $79,200 IA Make Buy $ Net Income Increase (Decrease)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sunland Company must decide whether to make or buy some of its components. The costs of producing 67,200 switches for its
generators are as follows.
Direct materials
Direct labor
(a)
$31,000
Variable overhead
$44,484 Fixed overhead
Instead of making the switches at an average cost of $2.97 ($199,584 +67,200), the company has an opportunity to buy the switches
at $2.75 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
Direct materials
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 eg.-45 or parentheses eg. (45).)
$44,900
$79,200
IA
Make
Buy
$
Net Income
Increase (Decrease)
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