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Make or Buy A company manufactures various - sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $ 1 6

Make or Buy
A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $168 per unit (100 bottles), including fixed costs of $33 per unit. A proposal is offered to purchase small bottles from an outside source for $97 per unit, plus $12 per unit for freight.
Question Content Area
a. Prepare a differential analysis dated February 18 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0".
Differential Analysis
Make (Alt.1) or Buy (Alt.2) Bottles
February 18
Line Item Description Make
Bottles
(Alternative 1) Buy
Bottles
(Alternative 2) Differential
Effects
(Alternative 2)
Unit costs:
Purchase price $Purchase price
$Purchase price
$Purchase price
Freight Freight
Freight
Freight
Variable costs Variable costs
Variable costs
Variable costs
Fixed factory overhead Fixed factory overhead
Fixed factory overhead
Fixed factory overhead
Total unit costs $Total unit costs
$Total unit costs
$Total unit costs
Question Content Area
b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

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