Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its generators are as follows.

Direct materials		$29,400		Variable overhead		$45,700
Direct labor		$42,336		Fixed overhead		$82,000

Instead of making the switches at an average cost of $2.92 ($199,436 68,300), the company has an opportunity to buy the switches at $2.66 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

Do It! Review 21-3 Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its generators are as follows Direct materials $29,400 Variable overhead $45,700 Direct labor $42,336 Fixed overhead $82,000 Instead of making the switches at an average cost of $2.92($199,436 68,300), the company has an opportunity to buy the switches at $2.66 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated Prepare an incremental analysis showing whether the company should buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45)) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost Wilma Company will incur$ of additional costs if i the switches. buys makes