Calc inc owns a machine that produces baskets for the gift

Reference no: EM13588864

Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 900 baskets in production each month. The costs of making one basket is $4 for direct materials, $3 for variable manufacturing overhead, $2 for direct labor, and $5 for fixed manufacturing overhead. The unit cost is based on the monthly production of 900 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $13 each, and can supply all the units it needs. Prepare an incremental analysis to determine if Calc should buy the baskets from the supplier. Show the impact on net income and indicate whether they should make or buy the baskets.

Reference no: EM13588864

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