Blossom Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 12,000 units of subcomponent JXY per month.

Direct materials costs		$39,500
Direct labour costs		28,100
Variable overhead		16,800
Fixed overhead*		13,700

*Fixed overhead includes $4,300 supervisors salary. International Firm agrees to supply Blossom with 12,000 units per month for a total cost of $142,000. If subcomponent JXY is outsourced, Blossom will be able to increase the production and sales of its final product by 1,180 units per month; the product is sold for $115 per unit and its average variable costs per unit are $75. The supervisors salary will be eliminated if subcomponent JXY is outsourced.

(a)

Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.)

		Make		Buy		Incremental Costs (Savings)
select an item Direct materialsFixed overheadTotal monthly costVariable overheadPurchase priceOpportunity costCost of good soldManufacturing overheadDirect labourCost of good soldManufacturing overhead		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Cost of good soldManufacturing overheadVariable overheadDirect labourCost of good soldManufacturing overheadDirect materialsPurchase priceFixed overheadTotal monthly costOpportunity cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Variable overheadDirect materialsCost of good soldManufacturing overheadCost of good soldManufacturing overheadPurchase priceTotal monthly costFixed overheadDirect labourOpportunity cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Purchase priceCost of good soldManufacturing overheadDirect labourCost of good soldManufacturing overheadTotal monthly costOpportunity costFixed overheadVariable overheadDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Opportunity costTotal monthly costDirect materialsVariable overheadDirect labourPurchase priceCost of good soldManufacturing overheadCost of good soldManufacturing overheadFixed overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct labourOpportunity costTotal monthly costFixed overheadCost of good soldManufacturing overheadCost of good soldManufacturing overheadDirect materialsPurchase priceVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Direct labourFixed overheadCost of good soldManufacturing overheadVariable overheadTotal monthly costDirect materialsPurchase priceCost of good soldManufacturing overheadOpportunity cost		$enter a total amount		$enter a total amount		$enter a total amount

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