Novak Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 48% of direct labour costs. The direct materials and direct labour costs per unit to make the lampshades are $4.60 and $6.00, respectively. Normal production is 49,200 table lamps per year. A supplier offers to make the lampshades at a price of $13.70 per unit. If Novak Inc. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $48,100 of fixed manufacturing overhead currently being charged to the lampshades will have to be absorbed by other products.

(a)

Prepare the incremental analysis for the decision to make or buy the lampshades. (Round answers to 0 decimal places, e.g. 5,275. If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.)

Number of units: 49,200		Make		Buy		Net Income Increase (Decrease)
select an item Purchase priceDirect materialsDirect labourTotal annual costVariable manufacturing overheadFixed manufacturing overhead		$enter a dollar amount		$enter a dollar amount		$enter a dollar amount
select an item Direct labourFixed manufacturing overheadDirect materialsVariable manufacturing overheadPurchase priceTotal annual cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Variable manufacturing overheadTotal annual costDirect labourPurchase priceFixed manufacturing overheadDirect materials		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Direct materialsTotal annual costPurchase priceDirect labourFixed manufacturing overheadVariable manufacturing overhead		enter a dollar amount		enter a dollar amount		enter a dollar amount
select an item Variable manufacturing overheadPurchase priceCost of good soldDirect labourDirect materialsTotal annual cost		enter a dollar amount		enter a dollar amount		enter a dollar amount
select a closing name Total annual costFixed manufacturing overheadPurchase priceDirect materialsDirect labourVariable manufacturing overhead		$enter a total amount		$enter a total amount		$enter a total amount