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Blossom, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 720 baskets in production each month. The
Blossom, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 720 baskets in production each month. The costs of making one basket are $3 for direct materials, $2 for variable manufacturing overhead, $1 for direct labor, and $4 for fixed manufacturing overhead. The unit cost is based on the monthly production of 720 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Blossom the baskets for $9 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Blossom should buy the baskets from the supplier. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45).)
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