Make or Buy

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $164 per unit (100 bottles), including fixed costs of $32 per unit. A proposal is offered to purchase small bottles from an outside source for $96 per unit, plus $9 per unit for freight.

a. 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".

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
January 25
	Make Bottles (Alternative 1)	Buy Bottles (Alternative 2)	Differential Effect (Alternative 2)
Unit costs:
Purchase price	$fill in the blank 7cbd74f61001075_1	$fill in the blank 7cbd74f61001075_2	$fill in the blank 7cbd74f61001075_3
Freight	fill in the blank 7cbd74f61001075_4	fill in the blank 7cbd74f61001075_5	fill in the blank 7cbd74f61001075_6
Variable costs	fill in the blank 7cbd74f61001075_7	fill in the blank 7cbd74f61001075_8	fill in the blank 7cbd74f61001075_9
Fixed factory overhead	fill in the blank 7cbd74f61001075_10	fill in the blank 7cbd74f61001075_11	fill in the blank 7cbd74f61001075_12
Total unit costs	$fill in the blank 7cbd74f61001075_13	$fill in the blank 7cbd74f61001075_14	$fill in the blank 7cbd74f61001075_15

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