Ch20 Q5

Show work please

Pottery Ranch Inc has been manufacturing its own finials for its curtain rods. The company is currently operatine at 100% of capacity and variable manufacturing overhead is charged to production at the rate of 61% of direct labor cost. The direct materials and direct labor cost perunit to make a pair of finials are $4 and $5. respectively. Normal production is 26.400 curtain rods per year. A supplier offers to make a pair of finials at a price of $13.45 per unit. If Pottery Ranch accepts the supplier's offer all variable manufacturing costs will be eliminated, but the $40.400 of fixed manufacturing overhead currently being charged to the finals will have to be absorbed by other products, Prepare the incremental analysis for the decision to make or buy the finials. (Enter negative amounts using either a negative sian preceding the numberes.-45 or parentheses es (45).) Net Income Increase (Decrease) Make Buy Direct materials $ $ 5 Direct laber Variable overhead costs Fixed manufacturing Costs Purchase price $ Total annual cost (b) Should Pottery Ranch buy the finials? NO Pottery Ranch should not buy the finials. Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $43,960? Yes y income would increase v bys