R&O Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for R&O for $270 each. R&O needs 1,500 clocks annually. R&O has provided the following unit costs for its commercial clocks:
Direct materials ........................................................ $100
Direct labor ............................................................... 110
Variable overhead ...................................................... 30
Fixed overhead (60% avoidable) ............................... 150
Instructions
Prepare an incremental analysis which shows the effect of the make-or-buy decision.