Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $140 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $96 per unit, plus $11 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Make or Buy

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $140 per unit (100 bottles), including fixed costs of $30 per unit. A proposal is offered to purchase small bottles from an outside source for $96 per unit, plus $11 per unit for freight.

a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
July 31
  Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect on Income (Alternative 2)
Sales price $fill in the blank 7f88cdf82f9e007_1 $fill in the blank 7f88cdf82f9e007_2 $fill in the blank 7f88cdf82f9e007_3
Unit costs:      
Purchase price $fill in the blank 7f88cdf82f9e007_4 $fill in the blank 7f88cdf82f9e007_5 $fill in the blank 7f88cdf82f9e007_6
Freight fill in the blank 7f88cdf82f9e007_7 fill in the blank 7f88cdf82f9e007_8 fill in the blank 7f88cdf82f9e007_9
Variable costs fill in the blank 7f88cdf82f9e007_10 fill in the blank 7f88cdf82f9e007_11 fill in the blank 7f88cdf82f9e007_12
Fixed factory overhead fill in the blank 7f88cdf82f9e007_13 fill in the blank 7f88cdf82f9e007_14 fill in the blank 7f88cdf82f9e007_15
Income (Loss) $fill in the blank 7f88cdf82f9e007_16 $fill in the blank 7f88cdf82f9e007_17 $fill in the blank 7f88cdf82f9e007_18

b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 1 images

Blurred answer
Knowledge Booster
Cost Sheet
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education