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Do It! Review 21-3 Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its
Do It! Review 21-3 Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its generators are as follows Direct materials $29,400 Vriable overhead $45,700 Direct labor $42,336 Fixed overhead $82,000 Instead of making the switches at an average cost of $2.92($199,436 68,300), the company has an opportunity to buy the switches at $2.66 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated Your answer is correct. Prepare an incremental analysis showing whether the company should buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Direct materials 29400 Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price 29400 42336 45700 82000 42336 45700 20500 -181678 61500 181678 Total cost 199436 243178 -43742
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