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Wilma Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as
Wilma Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as follows. Direct materials $30,200 Variable overhead $44,800 Direct labor $31,844 Fixed overhead $77,200 Instead of making the switches at an average cost of $2.94 ($184,044 + 62,600), the company has an opportunity to buy the switches at $2.73 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. (a) Your answer is partially correct. Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (45)) Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number eg.-45 or parentheses e.g. (45)) Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost Make 30200 31844 i 44800 77200 i 184044 0 $ Buy Net Income Increase (Decrease) 0 $ 30200 0 31844 0 44800 170898 -170898 Wilma Company will incur $ of additional costs if it buys the switches.
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