SECTION 3 (10 points) Gold Electronics Corporation must costs of producing decid

Question

SECTION 3 (10 points) Gold Electronics Corporation must costs of producing decide whether to make or buy some of the components for the radios it produces. The w 40,000 speakers for the radios are as follows Direct materials Direct labor $210,000 Variable overhead Fixed overhead 40,000 100,000 30,000 Instead of uy che ig the speakers at an average cost of $9.50 (5380,000/40,000 units), the company has an 50% of the fixed costs buy the speakers at $9.25 per unit. If the company purchases the speakers, all variable costs and will be eliminated. The company seeks to excess capacity minimize its costs. There is no opportunity cost to consider as the company has Instructions: In the space belox on this page, prepare a detailed "incremental analvsis" showing whether the company should "make or buy" the speakers for the radios. You Record uSt Show descriptions and computations in the space below your Jinal answer on the line provided near the botiom of ihe page Show required detailed incremental analysis descriptions and computations in the space below)

Explanation / Answer

Incremental analysis Make Buy Direct materials 210000 Direct labor 40000 Variable overhead 100000 Fixed manufacturing avoidable 15000 Purchase cost 370000 Total relevant cost 365000 370000 The company should make the speakers as it results in cost savings of $5000(370000-365000)

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