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Ivanhoe, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 1,000 baskets in production each month.
Ivanhoe, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 1,000 baskets in production each month. The costs of making one basket are $4 for direct materials, $3 for variable manufacturing overhead, $2 for direct labor, and $5 for fixed manufacturing overhead. The unit cost is based on the monthly production of 1,000 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Ivanhoe the baskets for $13 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Ivanhoe should buy the baskets from the supplier. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45)) Incremental cost to buy Incremental savings on direct labor Incremental savings on variable overhead v Incremental savings on fixed overhead Incremental savings on direct materials Additional cost to buy Carla Vista Corporation currently manufactures 3,200 staplers annually for its main product. The costs per stapler are as follows: Direct materials $9 55 Direct labor 13 Variable overhead 10 Fixed overhead Total 13 $45 Gallup Company has contacted Carla Vista with an offer to sell it 3,200 staplers for $36 each. $11 of the fixed overhead per unit is unavoidable. Prepare an incremental analysis for the make-or-buy decision. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45)) Incremental cost to buy Incremental savings on direct labor incremental savings on variable manufacturing overhead v 5 Incremental savings on fixed manufacturing overhead V Incremental savings on direct materials Incremental net cost to buy
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