E27-5 Use incremental analysis for make-or-buy decisio Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing is charged to production at the rate of 70% of direct labor cost. The direct materials and the direct labor cost per unt to make a pair of finials are $4 and $5, respectively. Normal production is 30,000 curtain rods per year. A supplier offers to make a pair of finials at a price of $12.95 per unit. If Pottery Ranch accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $45,000 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products, Instructions (a) Prepare the incremental analysis for the decision to make or buy the finials. (b) Should Pottery Ranch buy the finials? c) Would your answer be different in (b) if the productive capacity released by not making the finials could be used to produce income of $20,000 NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?". Prepare the incremental analysis for the decision to make or buy the finials. Net income Make Buy Increase (Decrease) Direct materials Value Value Value Direct labor Value Value Value Variable overhead costs Value Value Value Fixed manufacturing costs Value Value Value Purchase price Value Value Value Total annual costs ? ? ? (b) Should Pottery Ranch buy the finials? (c) Would your answer be different in (b) if the productive capacity released by not making the finiale could he need to produce income of San non Make Buy Net income Increase (Decrease) Value Value ? Total annual cost (above) Opportunity cost Total cost Value Value ? Value $0