Make an incremental analysis report for oriole company

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Question - Oriole Company manufactured 5,280 units of a component part that is used in its product and incurred the following costs:

Direct materials

$30,800

Direct labor 

13,200

Variable manufacturing overhead

8,800

Fixed manufacturing overhead 

17,600

 

$70,400

Another company has offered to sell the same component part to the company for $13 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Oriole Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $19,360.

Make an incremental analysis report for Oriole Company which can serve as informational input into this make or buy decision.

Reference no: EM133167069

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