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.