Current Designs faces a number of important decisions that require incremental analysis. One of Current Designs' competitive advantages is found in the ingenuity of its owner and CEO, Mike Cichanowski. His involvement in the design of kayak molds and production techniques has led to Current Designs being recognized as an industry leader in the design and production of kayaks. This ingenuity was evident in an improved design of one of the most important components of a kayak, the seat. The "Revolution Seating System" is a one-of-a-kind, rotating axis seat that gives unmatched, full-contact, under-leg support. It is quickly adjustable with a lever-lock system that allows for a customizable seat position that maximizes comfort for the rider. Having just designed the "Revolution Seating System, Current Designs must now decide whether to produce the seats internally or buy them from an outside supplier. The costs for Current Designs to produce the seats are as follows. Direct materials $24 /unit Direct labor $18 /unit Variable overhead $12 /unit Fixed overhead $20,000

Current Designs will need to produce 2,950 seats this year; 26% of the fixed overhead will be avoided if the seats are purchased from an outside vendor. After soliciting prices from outside suppliers, the company determined that it will cost $57 to purchase a seat from an outside vendor.

(a)

Your answer is partially correct.

Prepare an incremental analysis showing whether Current Designs should make or buy the "Revolution Seating System." (Enter decrease in net income then enter with a negative sign preceding the number or parenthesis, e.g. -15,000 or (15,000).) Net Income Increase Make Buy (Decrease) terials $ 70800 $ i $ 70800 jOr 53100 53100

Manufacturing Costs 35400 35400 lufacturing Costs 20000 14800 5200 Price 168150 168150

Jal Cost 179300 182950 3650