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Star, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Star, Inc for $22 each. Star, Inc
Star, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Star, Inc for $22 each. Star, Inc needs 500 clocks annually. If Star, Inc. chooses to make its commercial clocks, the following unit costs for producing commercial clocks are provided: Direct materials Direct labor Variable overhead Fixed overhead Unit costs $2 4 3 10 If Star, Inc. chooses to buy the clocks from the outsider supplier, 20% of fixed overhead costs is unavoidable. In addition, if the decision is made to purchase the clocks from the outside supplier, current production facilities could be leased to another company for $1,000. Required: Prepare an incremental analysis that shows the effect of the make-or-buy decision. (If there are no opportunity costs, please enter ZERO in row Opportunity costs for both MAKE and BUY) Copy and paste the table and questions below into the answer box and use it to complete the incremental analysis. Direct Material Direct Labor. MAKE BUY Variable Overhead Fixed Overhead Purchase Price Opportunity costs Total Costs Star, Inc. should make or buy the commercial clocks? Why
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