Make or buy

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $58 per unit (100 bottles), including fixed costs of $12 per unit. A proposal is offered to purchase small bottles from an outside source for $34 per unit, plus $5 per unit for freight.

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

Prepare a differential analysis dated January 25 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". Enter unit costs as positive values. Use a minus sign to indicate negative Differential Effects.

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
January 25
		Make Bottles (Alternative 1)		Buy Bottles (Alternative 2)		Differential Effects (Alternative 2)
Unit costs:
Purchase price		$fill in the blank 2		$fill in the blank 3		$fill in the blank 4
Freight		fill in the blank 5		fill in the blank 6		fill in the blank 7
Variable costs		fill in the blank 8		fill in the blank 9		fill in the blank 10
Fixed factory overhead		fill in the blank 11		fill in the blank 12		fill in the blank 13
Total unit costs		$fill in the blank 14		$fill in the blank 15		$fill in the blank 16

Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.