Reference no: EM132547654

Maplewood Company must decide whether to make or buy some of its components. The costs of producing 60,100 switches for its generators are as follows.

Direct materials $30,651

Variable overhead $43,873

Direct labour 42,070

Fixed overhead 61,302

Instead of making the switches at an average cost of $2.96 ($177,896 ÷ 60,100), the company has an opportunity to buy the switches at $2.76 per unit. If the company purchases the switches, all the variable costs and one-third of the fixed costs will be eliminated.

Question 1: Using an incremental analysis whether the company should make or buy the switches. What is the total Net Income Increase (Decrease)? (Round per unit answers to 2 decimal places, e.g. 15.25. If an amount reduces the net income then enter with a negative sign preceding the number e.g. -15,000