Question

Additional Brief Exercise 169 Notson, Inc. produces several models of clocks. An outside supplier has offered to produce the commercial clocks for Notson for $420 each. Notson needs 1,200 clocks annually. Notson has provided the following unit costs for its commercial clocks: Direct materials Direct labor Variable overhead Fixed overhead (40% avoidable) $100 140 80 150 Prepare an incremental analysis which shows the effect of the make-or-buy decision. (Enter negative amounts using either a negative sign preceding the number e.g.-45 or parentheses e.g. (45).) Incremental Analysis Incremental Effect nce, you will learn while you earn points based on the Point Potential Policy set by your instructor. Question Attempts: 0 of 1 used SAVE FOR LATER SUBMIT ANSWER Savings of fixed overhead Cost to make Savings of direct material Incremental net cost to make Incremental net cost to buy Cost to buy Cost savings Total cost savings Savings of direct labor Savings of variable overhead % Earn Maximum Points available only if you answer this question correctly in your first attempt.

Answer 1

Incremental Analysis					incremental Effect
cost to buy		(1200*420)			-504000
Cost savings:
Savings in direct materials (1200*100)				120000
Savings in direct labor		(1200*140)		168000
Savings in VMOH		(1200*80)		96000
Savings in FMOH		(150*40%*1200)		72000
total cost savings					456000
incremental net cost to buy					-48000