Acc400 Accounting for Decision Making: E21.6 The cost to Swank Company of manufacturing

Acc400 Accounting for Decision Making
Week 3 Assignment

E21.6 Incremental Analysis for a Make or Buy Decision
The cost to Swank Company of manufacturing 15,000 units of a particular part is $135,000, of which $60,000 is fixed and $75,000 is variable. The company can buy the part from an outside supplier for $6 per unit. Fixed costs will remain the same regardless of Swank’s decision.
Manufacturing Costs:
Variable Overhead 75,000
Fixed Overhead per month 60,000
Total Cost of Manufacturing 15,000 units per month 135,000
Average Manufacturing cost per unit ($ / units) $6

Should the company buy the part or continue to manufacture it? Prepare a comparative schedule in the format illustrated in Exhibit 21–6 
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