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Pharoah Company must decide whether to make or buy some of its components. The costs of producing 59,300 switches for its generators are as follows.
Pharoah Company must decide whether to make or buy some of its components. The costs of producing 59,300 switches for its generators are as follows. Direct materials $29,057 Variable overhead $50,998 Direct labour 41,510 Fixed overhead 58,707 Instead of making the switches at an average cost of $3.04 ($180,272 : 59,300), the company has an opportunity to buy the switches at $2.84 per unit. If the company purchases the switches, all the variable costs and one-third of the fixed costs will be eliminated. (a) Prepare an incremental analysis showing whether the company should make or buy the switches. (Round per unit answers to 2 decimal places, e.g. 15.25. 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).) Per Unit Make Number of units: $ $ The company should the components.Prepare an incremental analysis showing whether the company should make or buy the switches. (Round per unit answers to 2 decimal places, e.g. 15.25. 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).) Net Income Increase Per Unit Make Buy (Decrease) $ $ $ $ The company should v the components
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