Outsourcing

Dough, Re$,$ Mi Inc. sells many different types of cookie dough. The company is deciding whether to continue making its own dough or to outsource. If the company outsources, they will eliminate all of the variable overhead and $30\%$ of the fixed manufacturing overhead, but will incur shipping costs. Use the information below to determine whether Dough, Re$,$ Mi Inc should outsource or not.

Data

Sales price

Direct materials

Direct labor

Variable manufacturing overhead

Fixed manufacturing overhead $($MOH$)$ :

Avoidable fixed MOH

Unavoidable fixed MOH

Sales commissions

Advertising costs

Purchase price of outsourced product

Shipping costs of outsourced product

per unit

per unit

per unit

per unit

per month

per month

per month

per unit

per month

per unit

per unit

Costs per unit

Incremental analysis

Variable costs

Direct materials

Direct labor

Variable manufacturing overhead

Purchase price

Shipping costs

Sales commissions

Total variable costs

Fixed costs

Fixed manufacturing overhead

Advertising

Total fixed costs

Incremental cost

$q,$

$q,$

$q,$

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If Dough, Re$,$ Mi outsources, what would its incremental profit $($loss$)$ per unit equal?

If Dough, Re$,$ Mi outsources, what would its incremental profit $($loss$)$ given the expected units above?

Should Dough, Re$,$ Mi Inc, manufacture or outsource its dough?

B

Cell Formulas

$\frac{n}{a}$

n$/$a

n$/$a

n$/$a

n$/$a

$\frac{n}{a}$

$\frac{n}{a}$

n$/$a

n$/$a

$\frac{n}{a}$

$\frac{n}{a}$

n$/$a

$\frac{n}{a}$

$\frac{n}{a}$

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