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Wilma Company must decide whether to make or buy some of its-(Answered)

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Question

Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,500 switches for its generators are as follows.


Direct materials $29,600 Variable overhead $44,400
Direct labor $21,480 Fixed overhead $83,600


Instead of making the switches at an average cost of $2.96 ($179,080 ? 60,500), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

Prepare an incremental analysis showing whether the company should buy the switches.

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.



 

Paper#9209316 | Written in 27-Jul-2016

Price : $19
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