Solution-Determine whether calvin should make or buy ekrobs

Determine whether calvin should make or buy ekrobs

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Reference no: EM13548735

Calvin Company manufactures its own subassembly units known by the code name "ekrob." Calvin incurs the following annual costs in producing 40,000 ekrobs:

Direct materials	$ 60,000
Direct labor	90,000
Variable overhead	50,000
Fixed overhead	80,000
Total	$280,000

Calvin can purchase the ekrobs from Hobbes Corporation for $6.00 per unit. If they purchase the ekrobs, only $30,000 of the fixed overhead will be eliminated. However, the vacant factory space can be used to increase production of another product, which would generate annual income of $22,000.

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Prepare an incremental analysis to determine whether Calvin should make or buy ekrobs.

Reference no: EM13548735

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Determine whether calvin should make or buy ekrobs

Reference no: EM13548735

Reference no: EM13548735

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