Question

The management of Borealis Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, caled WISCO, component of the company's finished product The following information was collected from the accounting records and production data for the year ending December 31, 2020 1. The machining department produced 8,000 units of WISCO during the year 2. Variable manufacturing costs applicable to the production of each WISCO unit were direct materials 55.00, direct labour $4.90, indirect about 50.45, and 3. Fixed manufacturing costs applicable to the production of WISCO were as follows: is $9.34 Allocated Direct $2.050 Cost Item Depreciation Property taxes Insurance 535 125 920 $3,505 $1,595 The company will eliminate all variable manufacturing and directed costs if it purchases WISCO. Allocated costs will have to be absorbed by other production departments 4. The lowest quotation for 8,000 WISCO units from a supplier is 505,150 5. I WISCO units are purchased, freight and inspection costs would be $0.43 per unit, and the machining department would incur receiving costs totaling $1,285 per year. 15,000 or parenthesis, Prepare an incremental analysis for WISCO. (If an amount reduces the net income then enter with a negative sign preceding the number, (15,000).) Net Income Increase (Decrease Make Wisco Buy Wisco

Answer 1

Answer is given below

I have given Direct fixed component items separately below. please see how many boxes are available to fit the answer

working Make Buy Make Wisco per unit per unit $5.00 $40,000 $39,200 $3,600 $4.90 $2,720 $0.45 $0.34 Direct material Direct labour Indirect labor Utilities Depreciation Property taxes Insurance Purchase cost Freight and inspection cost Receiving cost Total Annual costs $2,050 $535 $920 Net Income Buy Increase Wisco (Decrease) $40,000 $39,200 $3,600 $2,720 $2,050 $535 $920 $85,150 -$85,150 $3,440 -$3,440 $1,285 -$1,285 $89,875 -$850 $0.43 $89,025 The Company should make WISCO Make Wisco Net Income Buy Increase Wisco (Decrease) $89,875 -$850 $3,350 $89,875 $2,500 Total Annual costs Opportunity costs Total Costs $89,025 $3,350 $92,375 Net Income will increase by $2,500 The company should buy WISCO

For Part B one more way of answer is given below. both answers are same. Opportunity cost can increase make cost or reduce buy cost

Make Wisco Net Income Buy Increase Wisco (Decrease) $89,875 -$850 -$3,350 $3,350 $86,525 $2,500 $89,025 Total Annual costs Opportunity costs Total Costs $89,025