Grey Inc.has been purchasing a component, Z for $85 a unit.The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future.The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows:
$\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct labor } & 15 \
\text { Variable factory overhead } & 26 \
\text { Fixed factory overhead } & 10 \
\text { Total }&\$81
\end{array}$
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z.

Question

Grey Inc.has been purchasing a component, Z for $85 a unit.The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future.The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows:
​ $\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct labor } & 15 \
\text { Variable factory overhead } & 26 \
\text { Fixed factory overhead } & 10 \
\text { Total }&\$81
\end{array}$ ​
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z.

Quizplus · Accepted Answer

The Answer of Grey Inc.has been purchasing a component, Z for $85 a unit.The company is currently operating at 75% of full capacity, and no significant increase in production is anticipated in the near future.The cost of manufacturing a unit of Z, determined by absorption costing method, is estimated as follows:
​ $\begin{array}{lr}
\text { Direct materials } & \$ 30 \
\text { Direct labor } & 15 \
\text { Variable factory overhead } & 26 \
\text { Fixed factory overhead } & 10 \
\text { Total }&\$81
\end{array}$ ​
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Z.

Grey IncHas Been Purchasing a Component, Z for $85 a Unit