Homework Answers
Solution: Differential Analysis for Make or Buy Decision
|
Make |
Buy |
||||
|
Total Cost $ |
Cost per unit $ |
Total Cost $ |
Cost per unit $ |
Net Savings $ Increase /(Decrease) |
|
|
Direct Material and Direct Labour |
29,700.00 |
9.00 |
0.00 |
0.00 |
29,700.00 |
|
Variable Overheads |
16,500.00 |
5.00 |
0.00 |
0.00 |
16,500.00 |
|
Fixed Overheads |
26,400.00 |
8.00 |
16,500.00 |
5.00 |
9,900.00 |
|
Purchase Price |
0.00 |
0.00 |
52,800.00 |
16.00 |
(52,800.00) |
|
Total Annual Cost |
72,600.00 |
22.00 |
69,300.00 |
21.00 |
3,300.00 |
Sheridan Company is recommended to buy 3300 of the wickets from Saran Company as there will be Net savings to Sheridan Company of $3,300.
Therefore, correct option is Buy; savings = $3300
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