Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $156 per unit (100 bottles), including fixed costs of $35 per unit. A proposal is offered to purchase small bottles from an outside source for $104 per unit, plus $8 per unit for freight. a. Prepare a differential analysis dated January 25 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". Differential Analysis Make Bottles (Alt. 1) or Buy Bottles (Alt. 2) January 25 Make Bottles (Alternative 1) Buy Bottles (Alternative 2) Differential Effect (Alternative 2) Unit costs: Purchase price $fill in the blank 54430b055ff4071_1 $fill in the blank 54430b055ff4071_2 $fill in the blank 54430b055ff4071_3 Freight fill in the blank 54430b055ff4071_4 fill in the blank 54430b055ff4071_5 fill in the blank 54430b055ff4071_6 Variable costs fill in the blank 54430b055ff4071_7 fill in the blank 54430b055ff4071_8 fill in the blank 54430b055ff4071_9 Fixed factory overhead fill in the blank 54430b055ff4071_10 fill in the blank 54430b055ff4071_11 fill in the blank 54430b055ff4071_12 Total unit costs $fill in the blank 54430b055ff4071_13 $fill in the blank 54430b055ff4071_14 $fill in the blank 54430b055ff4071_15 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 $156 per unit (100 bottles), including fixed costs of $35 per unit. A proposal is offered to purchase small bottles from an outside source for $104 per unit, plus $8 per unit for freight.

a. Prepare a differential analysis dated January 25 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".

Differential Analysis
Make Bottles (Alt. 1) or Buy Bottles (Alt. 2)
January 25
	Make Bottles (Alternative 1)	Buy Bottles (Alternative 2)	Differential Effect (Alternative 2)
Unit costs:
Purchase price	$fill in the blank 54430b055ff4071_1	$fill in the blank 54430b055ff4071_2	$fill in the blank 54430b055ff4071_3
Freight	fill in the blank 54430b055ff4071_4	fill in the blank 54430b055ff4071_5	fill in the blank 54430b055ff4071_6
Variable costs	fill in the blank 54430b055ff4071_7	fill in the blank 54430b055ff4071_8	fill in the blank 54430b055ff4071_9
Fixed factory overhead	fill in the blank 54430b055ff4071_10	fill in the blank 54430b055ff4071_11	fill in the blank 54430b055ff4071_12
Total unit costs	$fill in the blank 54430b055ff4071_13	$fill in the blank 54430b055ff4071_14	$fill in the blank 54430b055ff4071_15

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

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