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The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it fro
(a) Prepare an incremental analysis for CISCO.(Enter negative amounts using either a negative sin preceding the number e.g. (
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Answer #1
Incremental Analysis
Units 7900 7900
Make Buy Net Income Increase
Direct Material 40,369 40,369
Direct Labor 35,392 35,392
Indirect Labor 3,792 3,792
Utilities 3,081 3,081
Depreciation 2,900 900 2,000
Property Taxes 870 330 540
Insurance 1500 560 940
Purchase Price 83,151 -83,151
Freight and Inspection 2,923 -2,923
Receiving costs 1,280 -1,280
Total Annual cost 87,904 89,144 -1,240
Better to make
Note that the allocated costs are unavoidable and hence irrelevant to the decision
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