please by STEPS:

Wilma Company must decide whether to make or buy some of its components. The costs of producing 62,500 switches for its generators are as follows.

Direct materials		$29,700		Variable overhead		$45,400
Direct labor		$29,675		Fixed overhead		$79,600

Instead of making the switches at an average cost of $2.95 ($184,375 62,500), the company has an opportunity to buy the switches at $2.67 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

(a)

Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$		$		$
Direct labor
Variable manufacturing costs
Fixed manufacturing costs
Purchase price
Total cost		$		$		$

Wilma Company will incur $

of additional costs if it

makesbuys

the switches.