Maurice Tutor

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Teaching Since: May 2017
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  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 17 Aug 2017 My Price 11.00

Rubble Company

7-2 

DO IT!
 

Rubble Company must decide whether to make or buy some of its compo- nents. The costs of producing 60,000 switches for its generators are as follows.

 

 

Direct materials

$30,000

Variable overhead

$45,000

Direct labor

$42,000

Fixed overhead

$60,000

 

Instead of making the switches at an average cost of $2.95 ($177,000 4 60,000), the com- pany has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.

 

(a)  Prepare an incremental analysis showing whether the company should make or buy the switches. (b) Would your answer be different if the released productive capacity will generate additional income of $34,000?

Answers

Maurice Tutor
(5)
Status NEW Posted 17 Aug 2017 07:08 PM My Price 11.00

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