Raymond Corporation currently manufactures 3000 units of component XYZ annually for its main product. The costs per unit are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$ 4.00 \
\text { Direct labor } & 7.00 \
\text { Variable overhead } & 3.20 \
\text { Fixed overhead } & 7.00 \
\text { Total } & \$ 21.20 \
\hline
\end{array}$$ Dorie Company has contacted Raymond with an offer to sell it 3000 components of XYZ for $17.40 each. Sixty percent of the fixed overhead per unit is unavoidable.
Instructions
Prepare an incremental analysis for the make-or-buy decision.

Question

Raymond Corporation currently manufactures 3000 units of component XYZ annually for its main product. The costs per unit are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 4.00 \
\text { Direct labor } & 7.00 \
\text { Variable overhead } & 3.20 \
\text { Fixed overhead } & 7.00 \
\text { Total } & \$ 21.20 \
\hline
\end{array}$$ Dorie Company has contacted Raymond with an offer to sell it 3000 components of XYZ for $17.40 each. Sixty percent of the fixed overhead per unit is unavoidable.
Instructions
Prepare an incremental analysis for the make-or-buy decision.

Quizplus · Accepted Answer

The Answer of Raymond Corporation currently manufactures 3000 units of component XYZ annually for its main product. The costs per unit are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 4.00 \
\text { Direct labor } & 7.00 \
\text { Variable overhead } & 3.20 \
\text { Fixed overhead } & 7.00 \
\text { Total } & \$ 21.20 \
\hline
\end{array}$$ Dorie Company has contacted Raymond with an offer to sell it 3000 components of XYZ for $17.40 each. Sixty percent of the fixed overhead per unit is unavoidable.
Instructions
Prepare an incremental analysis for the make-or-buy decision.

Raymond Corporation Currently Manufactures 3000 Units of Component XYZ Annually