Blossom Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as follows. Direct materials $29,800 Direct labor Variable overhead $29,940 Fixed overhead Instead of making the switches at an average cost of $2.90 ($181,540 + 62,600), 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).) Buy Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Net Income Increase (Decrease) Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $45,400 $76,400 Make Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount enter a dollar amount Senter a total amount
Blossom Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches for its generators are as follows. Direct materials $29,800 Direct labor Variable overhead $29,940 Fixed overhead Instead of making the switches at an average cost of $2.90 ($181,540 + 62,600), 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).) Buy Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Net Income Increase (Decrease) Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost $45,400 $76,400 Make Senter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount enter a dollar amount Senter a total amount enter a dollar amount Senter a total amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Company must decide whether to make or buy some of its components. The costs of producing 62,600 switches
for its generators are as follows.
Direct materials $29,800
Direct labor
$29,940
Variable overhead
Fixed overhead
Instead of making the switches at an average cost of $2.90 ($181,540 ÷ 62,600), 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)
Direct materials
Direct labor
Variable manufacturing costs
Fixed manufacturing costs
Purchase price
Total cost
$45,400
$76,400
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).)
Net Income
Increase (Decrease)
Senter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
Senter a total amount
Make
Senter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
Senter a total amount
Buy
Senter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
enter a dollar amount
Senter a total amount
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