Winston Company_Incremental analysis

Question # 00001943 Posted By: ACCOUNTS_GURU Updated on: 10/05/2013 05:43 AM Due on: 12/31/2013
Subject Accounting Topic Accounting Tutorials:
Question
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WinstonCompanymanufactured5,000 unitsofacomponentpartthatisused in itsproductand incurredthe followingcosts:

Directmaterials

35,000

Directlabor

25,000

Variablemanufacturingoverhead

20,000

Fixedmanufacturingoverhead

18,000

98,000

Anothercompanyhasofferedtosellthesamecomponenttothecompanyfor$17.50 per unit.The?xed manufacturingoverheadconsists mainlyofdepreciationonequipmentused to manufacturethepartand wouldnotbereduced ifthecomponentpartwaspurchasedfromtheoutside?rm.If thecomponentpart is purchasedfromtheoutside?rm, WinstonCompanyhastheopportunitytouse the factoryequipment

toproduce anotherproductthatisestimatedtohaveacontributionmarginof$19,000

Instructions

Prepareanincrementalanalysisforthismakeorbuydecision.Shouldthecomponentbe madeor purchased?

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  1. Tutorial # 00001778 Posted By: ACCOUNTS_GURU Posted on: 10/05/2013 05:46 AM
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