Innova uses 1,070 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 $59.68

Direct labor 39.11

Overhead 126.50

________________________________

Total 225.29

Overhead costs include variable material handling costs of $7.32, 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 $200 per unit.

show the incremental analysis for the decision to make or buy IMC2.

Make IMC2 Buy IMC2 Net Income

(per unit) (per unit) Increase (decrease)

Direct material ____________ ____________ ____________

Direct labor ____________ ____________ ____________

Material handling ____________ ____________ ____________

Variable overhead ____________ ____________ ____________

Purchase price ____________ ____________ ____________

Total unit cost ____________ ____________ ____________

Should Innova purchase the component from the outside vendor if Innova's capacity remains idle? Yes/No