t Gradebook ORION Innova uses 1,045 units of the component IMC2 every month to m

ID: 2418914 • Letter: T

Question

t Gradebook ORION Innova uses 1,045 units of the component IMC2 every month to manufacture one of its products. The unit costs incurred to manufacture the component ar Direct labor Overhead Total 43.00 126.50 $226.50 Overhead costs include variable material handling costs of $7.20, which are applied to products on the basis of direct material costs. The remainder of the ove A vendor has offered to supply the IMC2 component at a price of $244.00 per unit. Prepare the incremental analysis for the decision to make or buy IMC2. (Enter negative amounts using either a negative sign preceding the number De Direct material Direct labor Material handling Variable overhead Purchase price Total unit cost Should Innova purchase the component from the outside vendor if Innova's capacity remains idle?

Explanation / Answer

Make IMC 2

Buy IMC 2

Net income Increase (decrease)

Direct material

Direct labor

Material handling

7.20

Variable overhead

71.58

Purchase price

178.78

244

Total unit cost

186825.10

254980

(68154.90)