$4.$ Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at $100\%$ of capacity, and variable manufacturing overhead is charged to production at the rate of $70\%$ of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $$40$ and $$50,$ respectively. Normal production is $30,000$ table lamps per year.

A supplier offers to make the lamp shades at a price of $$129\mathrm{.}50$ per unit. If Schopp Inc. accepts the supplier$$s offer, all variable manufacturing costs will be eliminated, but the$$450,000$ of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.

Instructions

$($a$)$ Prepare the incremental analysis for the decision to make or buy the lamp shades.

$($b$)$ Should Schopp Inc. buy the lamp shades?

$($c$)$ Would your answer be different in $($b$)$ if the productive capacity released by not be used to produce income of $$200,000?$