andybiersack154
06.05.2020 •
Business
Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,000 switches for its generators are as follows.
Direct materials $29,000
Variable overhead $44,000
Direct labor $25,000
Fixed overhead $76,000
Instead of making the switches at an average cost of $2.90 ($174,000 ÷ 60,000), the company has an opportunity to buy the switches at $2.65 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
Prepare an incremental analysis showing whether the company should make or buy the switches.
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Ответ:
Wilma Company should produce internally as this will savings of $42,000.
Explanation:
For a make or buy decision the relevant cash flows include
1.the differential variable of the two options
2.savings from avoidable fixed costs associated with internal production
Incremental analysis $
External cost of purchase($2.65 × 60,000) 159000
Variable cost - (29,000 + 44,000 + 25,000) = 98000
Extra variable cost of external purchase (61000 )
Savings in Avoidable fixed cost (1/4× 76,000) 19,000
Net extra cost of external purchase (42000 )
Wilma Company should produce internally as this will savings of $42,000.
Ответ:
i am in highschool what you need help with :)
Explanation: