Wilma Company must decide whether to make or buy some of its components

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Wilma Company must decide whether to make or buy some of its components. The costs of producing 63,800 switches for its generators are as follows.

Direct materials

 

$29,100

 

Variable overhead

 

$44,800

 

Direct labor

 

$40,462

 

Fixed overhead

 

$76,400

 


Instead of making the switches at an average cost of $2.99 ($190,762 ÷ 63,800), 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.

 

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Prepare an incremental analysis showing whether the company should 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

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Direct labor

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Variable manufacturing costs

 

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http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Fixed manufacturing costs

 

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http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Purchase price

 

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http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Total cost

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

 

Wilma Company will incur $http://edugen.wileyplus.com/edugen/art2/common/pixel.gif of additional costs if it http://edugen.wileyplus.com/edugen/art2/common/pixel.gif buysmakes the switches.

 

 

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http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

Would your answer be different if the released productive capacity will generate additional income of $42,718? (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)

 

Total Cost

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Opportunity cost

 

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http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

Total cost

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

$http://edugen.wileyplus.com/edugen/art2/common/pixel.gif

 

 

http://edugen.wileyplus.com/edugen/art2/common/pixel.gif YesNo, the answer is http://edugen.wileyplus.com/edugen/art2/common/pixel.gif samedifferent. The analysis shows that net income will be http://edugen.wileyplus.com/edugen/art2/common/pixel.gif decreasedincreased by $http://edugen.wileyplus.com/edugen/art2/common/pixel.gif.

 

 

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