Whispering Winds Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead 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 $4.70 and $5.60, respectively. Normal production is 48,800 table lamps per year.

A supplier offers to make the lampshades at a price of $13.50 per unit. If Whispering Winds Inc. accepts the supplier's offer, all variable manufacturing costs will be eliminated, but the $41,300 of fixed manufacturing overhead currently being charged to the lampshades will have to be absorbed by other products.

(a)

Prepare the incremental analysis for the decision to make or buy the lampshades. (Round answers to 0 decimal places, e.g. 5,275. If an amount reduces the net income then enter with a negative sign preceding the number e.g.-15,000 or parenthesis, e.g. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.)

Number of units: 48,800 Make Buy Net Income Increase (Decrease)

$ $ $