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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 |
|Variable manufacturing costs|
|Fixed manufacturing costs|
Wilma Company will incur $ of additional costs if it
Paper#9209316 | Written in 27-Jul-2016Price : $22