O ld Camp Company manufactures awnings for its own line of tents. The company is currently operating...

4.0 Ratings (501 Votes)

Requirement 1

Net decrease in income = $18000

	Make	Buy	Net income Increase (Decrease)
Direct Materials	$1,20,000.00		$ 1,20,000.00
Direct Labor	$ 72,000.00		$ 72,000.00
Variable OH	$ 54,000.00		$ 54,000.00
Fixed OH			$ -
Purchase Price		$2,64,000.00	$ (2,64,000.00)
Total	$2,46,000.00	$2,64,000.00	$ (18,000.00)

Requirement 2

Answer-----Manufacture.

Manufacturing cost is less than purchase cost so its better to manufacture.

Requirement 3

Answer---- Purchase

There will be additional profit of $4000 if awnings are purchased

	Make	Buy	Net income Increase (Decrease)
Direct Materials	$ 1,20,000.00		$ 1,20,000.00
Direct Labor	$ 72,000.00		$ 72,000.00
Variable OH	$ 54,000.00		$ 54,000.00
Fixed OH			$ -
Purchase Price		$ 2,64,000.00	$ (2,64,000.00)
Total	$ 2,46,000.00	$ 2,64,000.00	$ (18,000.00)
Benefit to be achived on manufacturing		$ (22,000.00)	$ 22,000.00
Total relevant cost	$ 2,46,000.00	$ 2,42,000.00	$ 4,000.00

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	Make	Buy	Net Income Increase (Decrease)
Direct Materials
Direct Labor
Variable OH
Fixed OH
Purchase Price
Total

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