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Walsh Corporation currently makes the nylon mooring cover for its main product, a fiberglass boat designed for tournament bass fishing. The costs of produci
Walsh Corporation currently makes the nylon mooring cover for its main product, a fiberglass boat designed for tournament bass fishing. The costs of produci the 2.000 covers needed each year follow: Nylon fabric $335,000 Wood battens Brass fittings 64,000 32.000 Direct labor 128,000 Variable manufacturing overhead 96,000 160.000 Fixed manufacturing overhead Calvin Company, a specialty fabricator of synthetic materials, can make the needed covers of comparable quality for $335 each, F.O.B. shipping point. Walsh wo furnish its own trademark insignia at a unit cost of $20. Transportation in would be $16 per unit, paid by Walsh Corporation. Walsh's chief accountant has prepared a cost analysis that shows that only 30% of fixed overhead could be avoided if the covers are purchased. The covers have been made in a remote section of Walsh's factory building, using equipment for which no alternate use is apparent in the foreseeable future. a. Prepare a differential analysis showing whether or not you would recommend that the mooring covers be purchased from Calvin Company. If appropriate use a negative sign with your answer to represent a net disadvantage answer. Do not use negative signs with any other answers. Make or Buy Differential Analysis Cost to purchasecovers 0 Costs avoided by purchasingcovers: Direct materials $ 0 Direct labor 0 Variable manufacturing overhead 0 Fixed manufacturing overhead 0 0 Net advantage (disadvantage)to purchase alternative $ 0 b. Assuming that the production capacity released by purchasing the covers could be devoted to a subcontracting job for another company that netted a contribution margin of $67,000, what maximum purchase price could Walsh pay for the covers? Round answer to two decimal places, if applicable. $ 0
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