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E7-11 (Algo) Analyzing Make or Buy Decision [LO 7-2, 7-4] Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,300 remotes is as follows: Cost Direct materials Direct labor Variable overhead Fixed overhead Total $ 66,950 $ 56,650 $ 30,900 $ 51,500 $ 206,000 Frannie is approached by Lincoln Company which offers to make the remotes for $18 per unit. Required: 1. Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? 2. Compute the difference in cost between making and buying the remotes if $20,600 of the fixed costs can be avoided. What is the change in net income? 3. What is the change in net income if fixed cost of $20,600 can be avoided and Frannie could rent out the factory space no longer in use for $20,600? Required 1 Required 2. Required 3 Compute the difference in cost between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income? per unit Difference in cost Change in net income Required 1 Required 2 Required 3 Compute the difference in cost between making and buying the remotes if $20,600 of the fixed costs can be avoided. What is the change in net income? per unit Difference in cost Change in net income Required 1 Required 2 Required 3 What is the change in net income if fixed cost of $20,600 can be avoided and Frannie could rent out the factory space no longer in use for $20,600? Change in net income

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