25.7

Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $160 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $97 per unit, plus $12 per unit for freight. a. Prepare a differential analysis dated January 25 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter"0" Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) January 25 Make Buy Differential Bottles Bottles Effect (Alternative 1) (Alternative 2) (Alternative 2) 0 Fixed factory overhead X 0 Total unit costs -160 139 Feedback V Check My Work For the make and buy alternatives provide the unit costs. Determine the differential effect of the costs by subtracting alternative 1 from alternative 2