A E BY Paste B7 A BI U E f x Frame fittings G X C D E F 1 Make or Buy Walsh Corporation currently makes the nylon mooring cover for its main product, a 2 fiberglass boat designed for tournament bass fishing. The costs of producing the 2,000 covers needed 3 each year follow: $ Nylon fabric Aluminum tubing Frame fittings Direct labor Variable manufacturing overhead Fixed manufacturing overhead 320,000 64,000 32,000 128,000 96,000 170,000 12 Calvin Company, a specialty fabricator of synthetic materials, can make the needed covers of comparable 13 quality for $290 each, F.O.B. shipping point. Walsh would furnish its own trademark insignia at 14 a unit cost of $20. Transportation would be $15 per unit, paid by Walsh Corporation. 15 16 Walsh's chief accountant has prepared a cost analysis that shows that only 30% of fixed overhead 17 could be avoided if the covers are purchased. The covers have been made in a remote section of Walsh's 18 factory building, using equipment for which no alternate use is apparent in the foreseeable future. 19 General $ v % H I Home Insert Draw Page Layout Formulas Data Review View Calibri (Body) 12A A E D 20 Paste BTU A E E B7 x f x Frame fittings C D E F G 20 Required 21 a. Prepare a differential analysis showing whether or not you would recommend that the mooring covers be purchased from Calvin Company 23 b. Assuming that the production capacity released by purchasing the covers could be devoted to a subcontracting job for another company that netted a contribution margin of $64,000, what maximum purchase price could Walsh pay for the covers? Identify two important qualitative factors that Walsh Corporation should consider in deciding whether to purchase the needed covers. Cast of purchasing covers: Purchase price Insignia to be furnished Transportation Total unit cost of purchasing Number to be purchased Total cost of purchased tops Cost avoided by purchasing tops: Nylon fabric Aluminum tubing Frame fittings Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost avoided Disadvantage of purchasing 47 b Maximum purchase price to be paid: Cost avoided through purchasing (see a.) Contribution margin on released capacity Less: Cost of insignia Transportation Total potential savings available for purchase price Maximum per-unit purchase price Assig 19 + MacBd