Asked by Rebika Basnet on May 04, 2024
Verified
R&R Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for R&R for $270 each. R&R needs 1500 clocks annually. R&R has provided the following unit costs for its commercial clocks: Direct materials $100 Direct labor 110 Variable overhead 30 Fixed overhead (70% avoidable) 150\begin{array} { l r } \text { Direct materials } & \$ 100 \\\text { Direct labor } & 110 \\\text { Variable overhead } & 30 \\\text { Fixed overhead (70\% avoidable) } & 150\end{array} Direct materials Direct labor Variable overhead Fixed overhead (70% avoidable) $10011030150 Instructions
Prepare an incremental analysis which shows the effect of the make-or-buy decision.
Incremental Analysis
The process of identifying the financial data that changes under alternative courses of action.
Fixed Overhead
Regular, ongoing costs that are not affected by the level of production or sales, such as rent, salaries, and insurance.
Direct Materials
Raw materials directly used in the manufacturing of a product, which are easily traceable to the finished product.
- Assess decisions to manufacture in-house or purchase externally, taking into account opportunity costs and overall cost impacts.
Verified Answer
KK
Learning Objectives
- Assess decisions to manufacture in-house or purchase externally, taking into account opportunity costs and overall cost impacts.