#10

Question 10 Answer saved Marked out of 1.00 P Flag question Make or Buy Allen Corporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops needed each year follow: Nylon fabric Aluminum tubing Frame fittings Direct labor Variable manufacturing overhead Fixed manufacturing overhead $290,000 96,000 24,000 162,000 30,000 152,000 Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable quality for $425 each, F.O.B. shipping point. Allen would furnish its own trademark insignia at a unit cost of $16. Transportation in would be $28 per unit, paid by Allen Corporation. Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead could be avoided if the tops are purchased. The tops have been made in a remote section of Allen's factory building, using equipment for which no alternate use is apparent in the foreseeable future. a. Prepare a differential analysis showing whether or not you would recommend that the convertible tops be purchased from Dustin Company. If appropriate, use a negative sign with your answer to represent a net disadvantage answer. Do not use negative signs with any other answers. Make or Buy Differential Analysis Cost to purchasetops: Costs avoided by purchasingtops: $ 0 Direct materials $ Direct labor o o o a Variable manufacturing overhead Fixed manufacturing overhead Net advantage (disadvantage) to purchase alternative 0 $ 0 b. Assuming that the production capacity released by purchasing the tops could be devoted to a subcontracting job for another company that netted a contribution margin of $50,100, what maximum purchase price could Allen Corporation pay for the tops? und answer to two decimal places, if applicable. $ 0