Do It! Review 7-3 (Part Level Submission) Flounder Company must decide whether to make or buy some of its components. The costs of producing 63,800 switches for its generators are as follows. Direct materials $29,300 Variable overhead $44,200 Direct labor $30,634 Fixed overhead $82,800 Instead of making the switches at an average cost of $2.93 ($186,934 + 63,800), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the xed costs will be eliminated. V (3) Your answer is correct. Prepare an incremental analysis showing whether the company should make or buy the switches. (Ifamount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) I E 'I'I'Elllll I H}- 4* Direct materials Direct labor 30,534 30 634 I ~/ ~/ ~/ _ ~/ ~/ ~/ Variable manufacturing costs 44,200 Fixed manufacturing costs 82,800 Purchase price Total cost 186,934 236,912 (49,978) v I Flounder Company will incur $_ of additional costs if it the switches. V (b) Would your answer be different if the released productive capacity will generate additional income of $53,668? (If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Net Income Make Buy Increase (Decrease) IS, the answer is E. The analysis shows that net income will be [3 by $:|