DO IT! 26-26 Wilma Company must decide whether to make or buy some of its compo- nents. The costs of producing 60,000 switches for its generators are as follows. Variable overhead Fixed overhead Direct materials $30,000 $42,000 $45,000 $60,000 Direct labor Instead of making the switches at an average cost of $2.95 ($177,000 + 60,000), the com- pany has an opportunity to buy the switches at $2.70 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. (b) Would your answer be different if the released productive capacity will generate additional income of $34,000?

DO IT! 26-26 Wilma Company must decide whether to make or buy some of its compo- nents. The costs of producing 60,000 switches for its generators are as follows. Variable overhead Fixed overhead Direct materials $30,000 $42,000 $45,000 $60,000 Direct labor Instead of making the switches at an average cost of $2.95 ($177,000 + 60,000), the com- pany has an opportunity to buy the switches at $2.70 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. (b) Would your answer be different if the released productive capacity will generate additional income of $34,000?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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