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Diamond Brands currently makes rolls for deli sandwiches it produces. Sanders Company has approached Diamond Brands with a proposal to sell the rolls at
Diamond Brands currently makes rolls for deli sandwiches it produces. Sanders Company has approached Diamond Brands with a proposal to sell the rolls at a price of $22,000 for 20,000 pounds. The following costs are associated with production of 20,000 pounds of rolls: Direct material Direct labor Manufacturing overhead Total $13,000 5,000 7,000 $25,000 The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Diamond Brands make or buy the rolls? Buy the rolls to save $3,000. Continue to make the rolls because the incremental cost of buying is $2,000. Buy them to save $1,000. Continue to make the rolls because the incremental cost of buying is $22,000. Continue to make the rolls because the incremental cost of buying is $1,000. 00
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