49

Weygandt, Managerial Accounting. 7e MANAGERIAL ACCOUNTING (ACCT 105) PMENT RESOUNCes Question 49 Wilma Company must decide whether to make or buy some of its components The costs of producing 63,800 switches for its generators are as follows. Direct materials $29,100 Variable overhead $44,800 Direct labor $40,462 Fixed overhead$76,400 Instead of making the switches at an average cost of $2.99 ($190,762 63,800), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one- fourth of the fixed costs will be eliminated. Prepare an incremental analysis showing whether the company should buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Net Income Increase (Decrease) Buy Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost wilma Company will incur $ of additional costs if it the switches Would your answer be different if the released productive capacity will generate additional income of $42,718? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Total Cost Opportunity cost Total cost ", the answer is .The analysis shows that net Income will be