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Blue Spruce Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 11,200 units
Blue Spruce Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 11,200 units of subcomponent JXY per month. Direct materials costs Direct labour costs Variable overhead Fixed overhead* $38,000 29,500 15,500 13,500 *Fixed overhead includes $5,100 supervisor's salary. International Firm agrees to supply Blue Spruce with 11,200 units per month for a total cost of $148,100. If subcomponent JXY is outsourced, Blue Spruce will be able to increase the production and sales of its final product by 1,080 units per month; the product is sold for $115 per unit and its average variable costs per unit are $65. The supervisor's salary will be eliminated if subcomponent JXY is outsourced. 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.) Incremental Costs (Savings) Make Buy $ ta
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