Question
Sheridan Company manufactured 5,520 units of a component part that is used in its product and incurred the following costs: Direct materials $32,200 Direct labor
Sheridan Company manufactured 5,520 units of a component part that is used in its product and incurred the following costs:
Direct materials | $32,200 | ||
Direct labor | 13,800 | ||
Variable manufacturing overhead | 9,200 | ||
Fixed manufacturing overhead | 18,400 | ||
$73,600 |
Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Sheridan Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $20,240. Prepare an incremental analysis report for Sheridan Company which can serve as informational input into this make or buy decision. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Do not leave any field blank. Enter 0 for the amounts.)
Make | Buy | Increase (Decrease) | |||||
---|---|---|---|---|---|---|---|
select an item Total Annual CostDirect LaborTotal CostPurchase PriceDirect MaterialsOpportunity CostVariable Manufacturing OverheadFixed Manufacturing Overhead | $enter a dollar amount | $enter a dollar amount | $enter a dollar amount | ||||
select an item Total CostDirect MaterialsPurchase PriceDirect LaborOpportunity CostTotal Annual CostVariable Manufacturing OverheadFixed Manufacturing Overhead | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Total Annual CostVariable Manufacturing OverheadDirect LaborPurchase PriceDirect MaterialsOpportunity CostFixed Manufacturing OverheadTotal Cost | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Opportunity CostFixed Manufacturing OverheadTotal CostTotal Annual CostPurchase PriceDirect LaborVariable Manufacturing OverheadDirect Materials | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select an item Total Annual CostDirect MaterialsDirect LaborPurchase PriceTotal CostFixed Manufacturing OverheadOpportunity CostVariable Manufacturing Overhead | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select a summarizing line for the first part Total CostTotal Annual CostFixed Manufacturing OverheadVariable Manufacturing OverheadDirect LaborDirect MaterialsOpportunity CostPurchase Price | enter a total amount for the first part | enter a total amount for the first part | enter a total amount for the first part | ||||
select an item Total CostDirect LaborTotal Annual CostPurchase PriceFixed Manufacturing OverheadOpportunity CostVariable Manufacturing OverheadDirect Materials | enter a dollar amount | enter a dollar amount | enter a dollar amount | ||||
select a closing name for this report Purchase PriceDirect MaterialsDirect LaborVariable Manufacturing OverheadTotal Annual CostFixed Manufacturing OverheadTotal CostOpportunity Cost | $enter a total amount for this report | $enter a total amount for this report | $enter a total amount for this report |
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