Wilma Company must decide whether to make or buy some of its components. The costs of producing 63,800 switches for its generators are as follows.

Direct materials		$29,300		Variable overhead		$44,200
Direct labor		$30,634		Fixed overhead		$82,800

Instead of making the switches at an average cost of $2.93 ($186,934 63,800), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

(a)

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 e.g. -45 or parentheses e.g. (45).)

		Make		Buy		Net Income Increase (Decrease)
Direct materials		$		$		$
Direct labor
Variable manufacturing costs
Fixed manufacturing costs
Purchase price
Total cost		$		$		$

Wilma Company will incur $ of additional costs if it

buysmakes

the switches.

(a) Your answer is partially correct. Try again. 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 e.g. -45 or parentheses e.g. (45).) Net Income Increase (Decrease) Make Buy Direct materials 29,300 29,300 $ $ $ X Direct labor 30,634 30,643 Variable manufacturing costs 44,200 44,200 > Fixed manufacturing costs 20,700 0 20,700 X Purchase price 0 174,812 174,812 XI x Total cost 124,834 174,812 49,978 49,978 buys Wilma Company will incur $ of additional costs if it the switches