(SO 2, 3) Prepare incremental analvsis related to a make-or-buy decision, consider opportunity cost, and identify non-financial factors. P7-49B finished product. December 31,2016 The management of Dunham Manufacturing Company has asked for your assistance in deciding whether to continue manufacturing a part or to buy it from an outside supplier. The part, called Tropica, is a component of Dunhams An analysis of the accounting records and the production data revealed the following information for the year ending 1. The machinery department produced 40,000 units of Tropica 2. Each Tropica unit requires 15 minutes to produce. Three people in the machinery department work full-time (2,500 hours per year each) producing Tropica. Each person is paid $15 per hour 3. The cost of materials per Tropica unit is $3 4. Manufacturing costs directly applicable to the production of Tropica are as follows: indirect labour, $6,000; utilities, $1,500; depreciation, $2,000; property taxes and insurance, $2,000. All of the costs will be eliminated if the company 5. The lowest price for Tropica from an outside supplier is $6 per unit. Freight charges would be $0.50 per unit, and the 6. If it purchases Tropica, Dunham will use the excess space that becomes available to store its finished product. purchases Tropica. company would require a part-time receiving clerk at $10,000 per year Currently, Dunham rents storage space at approximately $1.50 per unit stored per year. It stores approximately 6,000 units per year in the rented space. Problems: Set B Instructions (a) Prepare an incremental analysis for the make-or-buy decision. Should Dunham make or buy the part? Why? (b) Prepare an incremental analysis, assuming the released facilities (freed-up space) can be used to produce $15,000 (a) NI decrease $19,000 (b) NI decrease $4,000 of net income in addition to the savings on the rental of storage space. What decision should the company make now? (c) What non-financial factors should it consider in the decision