Montel Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,000 units of subcomponent JXY per month.

Direct materials costs		$38,000
Direct labour costs		28,000
Variable overhead		14,000
Fixed overhead*		12,000

*Fixed overhead includes $4,000 supervisors salary. International Firm agrees to supply Montel with 10,000 units per month for a total cost of $123,000. If subcomponent JXY is outsourced, Montel will be able to increase the production and sales of its final product by 1,000 units per month; the product is sold for $100 per unit and its average variable costs per unit are $65. The supervisors salary will be eliminated if subcomponent JXY is outsourced.

(a)

Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).)

		Make		Buy		Incremental Costs (Savings)
		$		$		$
		$		$		$