Wilma Company must decide whether to make or buy some of its components. The cos

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Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its generators are as follows.

Instead of making the switches at an average cost of $2.92 ($199,436 ÷ 68,300), the company has an opportunity to buy the switches at $2.66 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

Direct materials $29,400 Variable overhead $45,700 Direct labor $42,336 Fixed overhead $82,000 Do It! Review 21-3 Wilma Company must decide whether to make or buy some of its components. The costs of producing 68,300 switches for its generators are as follows Direct materials $29,400 Variable overhead $45,700 Direct labor $42,336 Fixed overhead $82,000 Instead of making the switches at an average cost of $2.92($199,436 ÷ 68,300), the company has an opportunity to buy the switches at $2.66 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated Prepare an incremental analysis showing whether the company should buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45)) Net Income Increase (Decrease) Make Buy Direct materials Direct labor Variable manufacturing costs Fixed manufacturing costs Purchase price Total cost Wilma Company will incur$ of additional costs if i the switches. buys makes

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Make Buy Net Income Increase (Decrease) Direct materials            29,400.00          29,400.00 Direct Labour            42,336.00          42,336.00 Variable Manufacturing overhead            45,700.00          45,700.00 Fixed manufacturing overhead              82,000.00                61,500.00          20,500.00 Purchase price =2.66*68,300              181,678.00     (181,678.00) Total Relevant cost          199,436.00              243,178.00       (43,742.00) Wilma company will incur 43,742 of additional costs if it buy the switches

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