9B

Ivanhoe Company must decide whether to make or buy some of its components. The costs of producing 67,900 switches for its generators are as follows. Direct materials $29,400 Variable overhead $45,300 Direct labor $42,526 Fixed overhead $82,400 Instead of making the switches at an average cost of $2.94 ($199,626 + 67,900), the company has an opportunity to buy the switches at $2.63 per unit. If the company purchases the switches, a\" the variable costs and onefourth of the xed costs will be eliminated. Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) Direct materials $ 29400 to 0 29400 Direct labor 42526 0 42526 Variable manufacturing 45300 0 45300 costs Fixed manufacturing costs 82400 61800 20600 Purchase price 0 181972 181972 Total cost $ 199626 243772 -44146 Ivanhoe Company will incur $ 44146 of additional costs if it buys v the switches.(b) Would your answer be different if the released productive capacity will generate additional income of $47,816? (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) Total Cost $ $ Opportunity cost Total cost $ $ v , the answer is . The analysis shows that net income will be v by $