Kingbird Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,500 units of subcomponent JXY per month.

Direct materials costs		$ 38,500
Direct labour costs		31,100
Variable overhead		14,800
Fixed overhead*		12,000

*Fixed overhead includes $ 4,200 supervisors salary.

International Firm agrees to supply Kingbird with 10,500 units per month for a total cost of $ 135,500. If subcomponent JXY is outsourced, Kingbird will be able to increase the production and sales of its final product by 1,000 units per month; the product is sold for $ 115 per unit and its average variable costs per unit are $ 75. The supervisors salary will be eliminated if subcomponent JXY is outsourced.

(a)

Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.)

		Make		Buy		Incremental Costs (Savings)
select an item Opportunity costTotal monthly costFixed overheadCost of good soldManufacturing overheadPurchase priceVariable overheadDirect labourDirect materialsCost of good soldManufacturing overhead		$ enter a dollar amount		$ enter a dollar amount		$ enter a dollar amount
select an item Direct labourPurchase priceTotal monthly costDirect materialsCost of good soldManufacturing overheadFixed overheadCost of good soldManufacturing overheadVariable overheadOpportunity cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Total monthly costOpportunity costCost of good soldManufacturing overheadDirect materialsCost of good soldManufacturing overheadDirect labourPurchase priceFixed overheadVariable overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct labourOpportunity costCost of good soldManufacturing overheadVariable overheadFixed overheadPurchase priceTotal monthly costDirect materialsCost of good soldManufacturing overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Variable overheadDirect labourTotal monthly costPurchase priceCost of good soldManufacturing overheadCost of good soldManufacturing overheadDirect materialsOpportunity costFixed overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Purchase priceTotal monthly costOpportunity costCost of good soldManufacturing overheadDirect materialsDirect labourVariable overheadFixed overheadCost of good soldManufacturing overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Fixed overheadTotal monthly costDirect labourVariable overheadDirect materialsOpportunity costCost of good soldManufacturing overheadCost of good soldManufacturing overheadPurchase price		$ enter a total amount		$ enter a total amount		$ enter a total amount