Pharoah Company must decide whether to make or buy some of its components. The costs of producing 63,800 switches for its generators are as follows. Direct materials Direct labor (a) Direct materials Direct labor $29,300 $30,634 Instead of making the switches at an average cost of $2.93 ($186,934÷63,800), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Variable manufacturing costs Purchase price Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Fixed manufacturing costs Total cost $ Variable overhead $ Fixed overhead Pharoah Company will incur $ $44,200 $82,800 Make $ $ Buy of additional costs if it $ $ Net Income Increase (Decrease) the switches.

Pharoah Company must decide whether to make or buy some of its components. The costs of producing 63,800 switches for its generators are as follows. Direct materials Direct labor (a) Direct materials Direct labor $29,300 $30,634 Instead of making the switches at an average cost of $2.93 ($186,934÷63,800), the company has an opportunity to buy the switches at $2.74 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated. Variable manufacturing costs Purchase price Prepare an incremental analysis showing whether the company should make or buy the switches. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Fixed manufacturing costs Total cost $ Variable overhead $ Fixed overhead Pharoah Company will incur $ $44,200 $82,800 Make $ $ Buy of additional costs if it $ $ Net Income Increase (Decrease) the switches.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PA: The following product Costs are available for Haworth Company on the production of chairs: direct...

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