Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $144 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $99 per unit, plus $7 per unit for freight. a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss. Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) July 31 Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect on Income (Alternative 2) Sales price $fill in the blank e2d948f7d021ffe_1 $fill in the blank e2d948f7d021ffe_2 $fill in the blank e2d948f7d021ffe_3 Unit costs: Purchase price $fill in the blank e2d948f7d021ffe_4 $fill in the blank e2d948f7d021ffe_5 $fill in the blank e2d948f7d021ffe_6 Freight fill in the blank e2d948f7d021ffe_7 fill in the blank e2d948f7d021ffe_8 fill in the blank e2d948f7d021ffe_9 Variable costs fill in the blank e2d948f7d021ffe_10 fill in the blank e2d948f7d021ffe_11 fill in the blank e2d948f7d021ffe_12 Fixed factory overhead fill in the blank e2d948f7d021ffe_13 fill in the blank e2d948f7d021ffe_14 fill in the blank e2d948f7d021ffe_15 Income (Loss) $fill in the blank e2d948f7d021ffe_16 $fill in the blank e2d948f7d021ffe_17 $fill in the blank e2d948f7d021ffe_18 b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3BE: Make or buy A company manufactures various-sized plastic bottles for its medicinal product. The...

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Make or Buy

A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $144 per unit (100 bottles), including fixed costs of $31 per unit. A proposal is offered to purchase small bottles from an outside source for $99 per unit, plus $7 per unit for freight.

a. Prepare a differential analysis dated July 31 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Use a minus sign to indicate a loss.

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
July 31
	Make Bottles (Alternative 1)	Buy Bottles (Alternative 2)	Differential Effect on Income (Alternative 2)
Sales price	$fill in the blank e2d948f7d021ffe_1	$fill in the blank e2d948f7d021ffe_2	$fill in the blank e2d948f7d021ffe_3
Unit costs:
Purchase price	$fill in the blank e2d948f7d021ffe_4	$fill in the blank e2d948f7d021ffe_5	$fill in the blank e2d948f7d021ffe_6
Freight	fill in the blank e2d948f7d021ffe_7	fill in the blank e2d948f7d021ffe_8	fill in the blank e2d948f7d021ffe_9
Variable costs	fill in the blank e2d948f7d021ffe_10	fill in the blank e2d948f7d021ffe_11	fill in the blank e2d948f7d021ffe_12
Fixed factory overhead	fill in the blank e2d948f7d021ffe_13	fill in the blank e2d948f7d021ffe_14	fill in the blank e2d948f7d021ffe_15
Income (Loss)	$fill in the blank e2d948f7d021ffe_16	$fill in the blank e2d948f7d021ffe_17	$fill in the blank e2d948f7d021ffe_18

b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.

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