Union Lighting Inc. has been manufacturing its own lamp shades for its table lamps. The...
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Union Lighting Inc. has been manufacturing its own lamp shades for its table lamps. The company is currently operating at capacity. The direct materials cost is $ per unit, the direct labour cost is $ per unit and variable manufacturing costs are of direct labour costs. Total fixed manufacturing costs are $ per year. Normal production is lampshades per year. A supplier offers to make the lampshades at a price of $ per unit. If Union accepts the offer all variable manufacturing costs would be avoidable and $ of the total fixed manufacturing costs would be unavoidable. a Prepare an incremental analysis for the decision to make or buy the lampshades. b Should Union make or buy the lampshades? What is the $ advantage? c Assume that if Oldman decides to buy the lampshades part of the factory space could be used to produce other lighting products that would generate a contribution margin $ per unit. Should Union make or buy the lampshades? Show your calculations.
Union Lighting Inc. has been manufacturing its own lamp shades for its table lamps. The company is currently operating at capacity. The direct materials cost is $ per unit, the direct labour cost is $ per unit and variable manufacturing costs are of direct labour costs. Total fixed manufacturing costs are $ per year. Normal production is lampshades per year.
A supplier offers to make the lampshades at a price of $ per unit. If Union accepts the offer all variable manufacturing costs would be avoidable and $ of the total fixed manufacturing costs would be unavoidable.
a Prepare an incremental analysis for the decision to make or buy the lampshades.
b Should Union make or buy the lampshades? What is the $ advantage?
c Assume that if Oldman decides to buy the lampshades part of the factory space could be used to produce other lighting products that would generate a contribution margin $ per unit. Should Union make or buy the lampshades? Show your calculations.
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