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 fixed costs will be eliminated.

V (a) Your answer is partially correct. Try again. 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) Direct materials m 29 300 $ $ $ ' oi ~/ Direct labor 30 534 30,634 V Fixed manufacturing costs _| Purchase price E E I: I: $ $ T: '3 Flounder Company will incur $ _ of additional costs if it the switches