Question
Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $156 per unit (100 bottles),
Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $156 per unit (100 bottles), including fixed costs of $37 per unit. A proposal is offered to purchase small bottles from an outside source for $104 per unit, plus $8 per unit for freight. a. Prepare a differential analysis dated July 31 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". Use a minus sign to indicate a loss. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) Make Bottles (Alternative 1) 0 July 31 Buy Bottles (Alternative 2) 0 Differential Effect on Income (Alternative 2) 0 Sales price Unit costs: Purchase price 0 -104 -104 Freight 0 -8 -8 Variable costs 156 X 0 -156 X Fixed factory -37 -37 0 overhead Income (Loss) 193 X -149 -44 X
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