Ruelman Corporation currently manufactures 3,000 units of component XYZ annually for its main product. The costs per stapler are as follows:
Direct materials ......................................... $ 4.00
Direct labor ................................................ 6.00
Variable overhead ...................................... 3.20
Fixed overhead ......................................... 7.00
Total ........................................................... $22.00
Dorie Company has contacted Ruelman with an offer to sell it 3,000 components of XYZ for $17.40 each. Sixty percent of the fixed overhead per unit is unavoidable.
Instructions
Prepare an incremental analysis for the make-or-buy decision.