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Vaughn Inc, has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overheaq
Vaughn Inc, has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overheaq is charged to production at the rate of 50% of direct labour costs. The direct materials and direct labour costs per unit to make the lampshades are $4.90 and $5.90, respectively. Normal production is 49,900 table lamps per year. A supplier offers to make the lampshades at a price of $14.30 per unit. If Vaughn Inc. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $49,500 of fixed manufacturing overhead currently being charged to the lampshades will have to be absorbed by other products. Prepare the incremental analysis for the decision to make or buy the lampshades. (Round answers to 0 decimal ploces, eg. 5,275 . If an amount reduces the net income then enter with a negative sign preceding the number eg, 15,000 or parenthesis, eg. (15,000). While alternate approoches are possible, irrelevant fixed costs should be included in both options when solving this problem.)
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