Do It! Review 7-3 (Part Level Submission)

Blue Company must decide whether to make or buy some of its components. The costs of producing 62,500 switches for its generators are as follows.

Direct materials		$30,700		Variable overhead		$45,800
Direct labor		$21,150		Fixed overhead		$83,600

Instead of making the switches at an average cost of $2.90 ($181,250 62,500), the company has an opportunity to buy the switches at $2.72 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 partially correct. Try again. 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 Net Income Increase (Decrease) Make Buy Direct materials 3070 Direct labor 2115 2115 Variable manufacturing costs Fixed manufacturing costs Purchase price 45800 Total cost 181250 Blue Company will incur of additional costs if itBuys the switches