Return to Blackboard Accounting for Decision Making for George Mason University,

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Return to Blackboard Accounting for Decision Making for George Mason University, 1e Hele I System Announcements ice Assignment Gradebook ORION nent CALCULATOR PRITER VERSION BACK Marigold Company must decide whether to make or buy some of its components. The costs of producing 60,200 switches for its generators are as follows. Direct materials$29,500 Variable $45,600 Direct labor$25,900 Fixed overhead $79,600 making the switches at an average cost of $3.00 ($180,500 60,200), 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 Y (a) Prepare an incremental analysis showing whether the company should make or buy the switches number e.g.-45 or parentheses e.g. (45).) i (If amount decreases net income then enter the amount using either a negative sign preceding the Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost Marigold Company will incur s of additional costs if itthes to search 3-50 PM

Explanation / Answer

Make Buy Net Income Increase (Decrease) Direct Materials      29,500.00                     -          29,500.00 Direct Labor      25,900.00                     -          25,900.00 Variable Overhead      45,600.00                     -          45,600.00 Fixed Overhead      79,600.00      59,700.00        19,900.00 Purchase Cost                     -      164,948.00 (164,948.00) Total Cost    180,600.00    224,648.00     (44,048.00) Marigold will incur $44,048 additional cost if it purchases the switches.

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