Barge Co. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Barge for $840 each. Barge needs 1,200 clocks annually. Barge has provided the following unit costs for its commercial clocks:
Direct materials ............................................. $200
Direct labor .................................................... 240
Variable overhead .......................................... 160
Fixed overhead (40% avoidable) ...................... 300
Instructions
Prepare an incremental analysis which shows the effect of the make-or-buy decision.