Mah Company manufactures 2,000 staplers annually for its main product. The costs per stapler are as follows:

Direct material ......$3.00

Direct labor ....... 8

Variable overhead ...... 4

Fixed overhead ...... 7

Total .......... $22.00

Ruple Corporation has contacted Mah with an offer to sell it 2,000 staplers for $20 each. Note: $4 of the fixed overhead per unit is unavoidable

Instruction

(a) Prepare an incremental analysis for the make or buy decision.

(b) Should Mah Company make or buy the staplers? Justifydecision.

Transcribed Image Text:

Make Buy Cost to buy from Ruple Direct materials Direct labor Variable overhead Fixed overhead Total