Exercise 20-8

Innova uses 1,020 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component are as follows.

Direct materials		$ 56.00
Direct labor		37.00
Overhead		126.50
Total		$219.50

Overhead costs include variable material handling costs of $6.90, which are applied to products on the basis of direct material costs. The remainder of the overhead costs are applied on the basis of direct labor dollars and consist of 60% variable costs and 40% fixed costs. A vendor has offered to supply the IMC2 component at a price of $243.00 per unit. (a) Prepare the incremental analysis for the decision to make or buy IMC2. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)