question also asks: " Should Pharoah Bicycle Company buy the seats from the outside supplier?"

Pharoah Bicycle Company manufactures its own seats for its bicycles. The company is currently operating at 100% capacity. Variable manufacturing overhead is charged to production at the rate of 60% of direct labor cost. The direct materials and direct labor cost per unit to make the bicycle seats are $8 and $9, respectively. Normal production is 45,000 bicycles per year. A supplier offers to make the bicycle seats at a price of $21each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $27.000 of fixed manufacturing overhead currently being charged to the bicycle seats will have to be absorbed by other products, a Prepare the incremental analysis for the decision to make or buy the bicycle seats. (Enter negative amounts using either a negative sign preceding the number eg. -45 or parentheses es: (45). Do not leave any field blank. Enter for the amounts.) Net Income Increase (Decrease) Make Buy > > $ VA