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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 $30 per unit (1,000
Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $30 per unit (1,000 bottles), including fixed costs of $14 per unit. A proposal is offered to purchase small bottles from an outside source for $20 per unit, plus $1 per unit for freight. 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 Line Item Description February 18 Make Bottles Buy Bottles Differential Effects (Alternative 1) (Alternative 2) (Alternative 2) Unit costs: Purchase price 0 20 20 Freight 0 1 T Variable costs 0 21 Fixed factory overhead. 14 14 0 Total unit costs 35 b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles. Make the bottles Feedback Check My Work Compare the differential revenues and differential costs of making vs. buying bottles. Which one has the greatest positive differential effect on income?
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