Bramble Company must decide whether to make or buy some of its components. The costs of producing 69,800 switches for its generators are as follows.

Direct materials		$29,700		Variable overhead		$45,400
Direct labor		$51,806		Fixed overhead		$80,400

Instead of making the switches at an average cost of $2.97 ($207,306 69,800), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

(a)

Prepare an incremental analysis showing whether the company should make or buy the switches. (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$		$		$
Direct labor
Variable manufacturing costs
Fixed manufacturing costs
Purchase price
Total cost		$		$		$

Bramble Company will incur $

of additional costs if it

makesbuys

the switches.