Do It! Review 7-3 Wilma Company must decide whether to make or buy some of its components. The costs of producing 67,300 switches for its generators are as follows. Direct materials $30,500 Variable overhead $44,100 Direct labor $41,662 Fixed overhead $81,600 Instead of making the switches at an average cost of $2.94 ($197,862 +67,300), the company has an opportunity to buy the switches at $2.69 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Net Income Increase (Decrease) Buy Direct materials $ $ Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost Wilma Company will incur $ of additional costs if it the switches. Would your answer be different if the released productive capacity will generate additional income of $48,5457 (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Make Buy Net Income Increase (Decrease) Total Cost $ Opportunity cost Total cost $ the answer is The analysis shows that net income will be by $ Brief Exercise 7-7 Your answer is partially correct. Try again. Bryant Company has a factory machine with a book value of $93,700 and a remaining useful life of 7 years. It can be sold for $34,700. A new machine is available at a cost of $378,500. This machine will have a 7-year useful life with no salvage value. The new machine will lower annual variable manufacturing costs from $605,900 to $457,900. Prepare an analysis showing whether the old machine should be retained or replaced. (In the first two columns, enter costs and expenses as positive amounts, and any amounts received as negative amounts. In the third column, enter net income increases as positive amounts and decreases as negative amounts. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Retain Equipment Replace Equipment Net Income Increase (Decrease) Variable manufacturing costs 605900 457900 148000 New machine cost 378500 -378500 Sell old machine -34700 34700 Total 605900 801700 -195800 X retained The old factory machine should be Click if you would like to Show Work for this question: Open Show Work By accessing this Question Arcictanco