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Q34 Metlock Firm is considering whether to outsource the manufacture...

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Accounting

Q34
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Metlock Firm is considering whether to outsource the manufacture of subcomponent JXY. The accounting department provides the following cost information for manufacturing 10,900 units of subcomponent JXY per month $39.200 30.800 Direct materials costs Direct labour costs Variable overhead Fixed overhead 14,100 13,600 *Fixed overhead includes $4,900 supervisor's salary International Firm agrees to supply Metlock with 10.900 units per month for a total cost of $131,700. If subcomponent JXY is outsourced Metlock will be able to increase the production and sales of its final product by 1.200 units per month; the product is sold for $115 per unit and its average variable costs per unit are $85. The supervisor's salary will be eliminated if subcomponent JXY is outsourced. Prepare an incremental analysis for subcomponent JXY. (If an amount reduces the incremental costs then enter with a negative sign preceding the number eg.-15,000 or parenthesis, eg. (15,000). While alternate approaches are possible, irrelevant fixed costs should be included in both options when solving this problem.) Incren (Savi Make Buy $ $ $

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