Oriole Pets has recently started to manufacture talking toy pets. The cost structure to manufacture 11,800 of these toy pets is as follows: Direct materials ($30 per pet) $354,000 Direct labour ($30 per pet) 354,000 Variable overhead ($12 per pet) 141,600 Allocated fixed overhead ($20 per pet) 236,000 Total $1,085,600 Oriole Pets is approached by Blue Spruce Inc., which offers to make the toy pets for $85 per unit. Using incremental analysis, determine whether Oriole Pets should accept this offer under each of the following independent assumptions: Prepare an incremental analysis. Assume that $118,000 of the fixed overhead cost (in making 11,800 of the toy pets) is avoidable. Enter savings 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.) Cost Make Buy Cost (Saving) Direct materials 354,000 354,000 Direct labour 354,000 O 354,000 Variable overhead v 141,600 0 141,600 Fixed overhead 236,000 118,000 118,000 Purchase price 0 1,003,000 -1,003,000 1,085,600 $ Total annual cost 1,121,000 35,400 Should Oriole Pets continue to make the pets or buy the pets? Oriole Pets should continue to make v the pets.Prepare an incremental analysis. Assume that none of the fixed overhead is avoidable. However, if the pets are purchased from Blue Spruce, Oriole Pets can use the released productive resources to generate additional income of $198,800. (Enter savings 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.) Cost Make Buy Cost (Saving) Direct materials $ 354,000 $ 354,000 Direct labour 354,000 0 354,000 Variable overhead 141,600 0 141,600 Fixed overhead 236,000 236,000 0 Purchase price 0 1,003,000 -1,003,000 1,085,600 1,239,000 -153,400 Total annual cost Add v : Opportunity cost 198,800 0 198,800 $ 1,284,400 1,239,000 45,400 Total cost Should Oriole Pets continue to make the pets or buy the pets? Oriole Pets should buy the pets