Assume that Nantucket Nectars reports the following costs to make 17.5 oz. bottles for its juice cocktails:

Another manufacturer offers to sell Nantucket Nectars the bottles for $.25. The capacity now used to make bottles will become idle if the company purchases the bottles. Further, one supervisor with a salary of $60,000, a fixed cost, would be eliminated if the bottles were purchased. Prepare a schedule that compares the costs to make and buy the 17.5 oz. bottles. Should Nantucket Nectars make or buy the bottles?

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Nantucket Nectars Company Cost of Making 17.5-Ounce Bottles Total Cost for 1,000,000 Bottles ot per Bottle Direct materials Direct labor Variable factory overhead Fixed factory overhead Total costs $ 80,000 30,000 60,000 85,000 S255,000 $.080 030 060 085 $.255