1. Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows. Direct materials $30,000 Variable overhead $45,000 Direct labor $42,000 Fixed overhead $60,000 Instead of making the switches at an average cost of $2.95 ($177,000 60,000), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

Required:

1. Submit an incremental analysis showing whether the company should make or buy the switches.
2. Would your answer be different if the released productive capacity will generate additional income of $34,000?