Schopp Inc. has been manufacturing its own shades for its table lamps.
E7-5Â Schopp Inc. has been manufacturing its own shades for its table lamps. The com- pany is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $4 and $5, respectively. Normal production is 30,000 table lamps per year.
A supplier offers to make the lamp shades at a price of $12.75 per unit. If Schopp Inc. accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but   the
$45,000 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.
Instructions
(a)Â Â Prepare the incremental analysis for the decision to make or buy the lamp shades.
(b)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 
Should Schopp Inc. buy the lamp shades?
(c)Â Â Â Would your answer be different in (b) if the productive capacity released by not making the lamp shades could be used to produce income of $25,000?
Answers
Status NEW
Posted 28 May 2017 09:05 AM
My Price 7.00
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Attachments
file 1495963259-1356422_1_636315305043861117_Incremental-analysis.xlsx preview (305 words )
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