Homework Answers
1) Incremental Analysis :-
| Particulars | Make | Outsource | Difference |
| Variable Costs | (80000*$14.75)=$1180000 | (80000*$12.90)=$1032000 | $148000 |
| Plus : Fixed Costs | (80000*$1.25)=$100000 | $100000 | |
| Total Cost of 80000 Components | $1280000 | $1032000 | $248000 |
| Less : Profit from another Product | ($26000) | $26000 | |
| Net Cost | $1280000 | $1006000 | $274000 |
If River Enterprises outsources the Manufacturing of component. Operating income will
Increase by $274000
2) Maximum Price Per Unit if Outsourced :-
= ((80000*$16) + $26000)/80000
= $16.325
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