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The management of a fictional manufacturing company, XYZ Inc., is faced with a decisionregarding the production of a component named Widget for their flagship product.
The management of a fictional manufacturing company, XYZ Inc., is faced with a decisionregarding the production of a component named "Widget" for their flagship product. The Widgetis a critical part of their product line, and management must decide whether to continue producingit inhouse or to outsource its production to an external supplier.The following information was collected from the accounting records and production data for theyear ending December units of Widget were produced in the Machining Department. Variable manufacturing costs applicable to the production of each Widget unit were: Direct materials $ Direct labor $ Indirect labor $ Utilities $ Fixed manufacturing costs applicable to the production of Widget were:Cost Item Direct AllocatedRent $ $Depreciation Property taxes All variable manufacturing and direct fixed costs will be eliminated if Widget is purchased.Allocated costs will not be eliminated if Widget is purchased. So if Widget is purchased, the fixedmanufacturing costs allocated to Widget will have to be absorbed by other production departments. The quotation for Widget units from a supplier is $unitInstructions:a Prepare the incremental analysis for the decision to make or buy the Widget.
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