7-3

Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,900 switches for its generators are as follows. Instead of making the switches at an average cost of $2.95 ($203,255 / 68,900), the company has an opportunity to buy the switches at $2.66 per unit. If the company purches 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).) Would your answer be different if the released productive capacity will generate additional income of $ 45,899? ( Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)