Solution-Prepare an incremental analysis

Prepare an incremental analysis

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Reference no: EM133090673

Question - Ivanhoe Company must decide whether to make or buy some of its components. The costs of producing 59,100 switches for its generators are as follows.

Direct materials	$28,959	Variable overhead	$40,779
Direct labour	41,961	Fixed overhead	60,282

Instead of making the switches at an average cost of $2.91 ($171,981 ÷ 59,100), the company has an opportunity to buy the switches at $2.71 per unit. If the company purchases the switches, all the variable costs and one-third of the fixed costs will be eliminated.

Required - Prepare an incremental analysis showing whether the company should make or buy the switches. Would your answer be different if the released productive capacity would generate additional income of $30,768?

Reference no: EM133090673

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Prepare an incremental analysis

Reference no: EM133090673

Reference no: EM133090673

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