Mathematics, 18.03.2021 02:50 carolelai08
Suppose Hewlett-Packard Company must decide whether to make or buy some of its
components from Solectron Corp. The cost of producing 50,000 electrical connectors for its
printers is $110,000, broken down as follows.
Direct materials $60,000 Variable manufacturing overhead $12,000
Direct labor 30,000 Fixed manufacturing overhead 8,000
Instead of making the electrical connectors at an average cost per unit of $2.20 ($110,000 _
50,000), the company has an opportunity to buy the connectors at $2.15 per unit. If the
connectors are purchased, all variable costs and one-half of the fixed costs will be eliminated.
Instructions
A. Prepare an incremental analysis showing whether the company should make or buy the
electrical connectors.
B. Will your answer be different if the released productive capacity resulting from the
purchase of the connectors will generate additional income of $25,000?β
Answers: 1
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Suppose Hewlett-Packard Company must decide whether to make or buy some of its
components from Sole...
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