Selected Item Attempt Preview Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $55 per unit (100 bottles), including fixed costs of $12 per unit. A proposal is offered to purchase small bottles from an outside source for $36 per unit, plus $3 per unit for freight. Unit costs: 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 Purchase price Freight Variable costs Fixed factory overhead Total unit costs Make Buy Bottles Bottles (Alternative 1) (Alternative 2) (Alternative 2) 0 0 > 133 X 31 X -164 X 99 X X 12 0 > 31 X -142 Differential Effects X -99 -12 X 133 0 < X X X 22 Preview In Window X Large Preview b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles. Buy the bottles

Selected Item Attempt Preview Make or Buy A company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $55 per unit (100 bottles), including fixed costs of $12 per unit. A proposal is offered to purchase small bottles from an outside source for $36 per unit, plus $3 per unit for freight. Unit costs: 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 Purchase price Freight Variable costs Fixed factory overhead Total unit costs Make Buy Bottles Bottles (Alternative 1) (Alternative 2) (Alternative 2) 0 0 > 133 X 31 X -164 X 99 X X 12 0 > 31 X -142 Differential Effects X -99 -12 X 133 0 < X X X 22 Preview In Window X Large Preview b. Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles. Buy 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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