Winston Company_Incremental analysis

Winston Company_Incremental analysis

Question
	

WinstonCompanymanufactured5,000 unitsofacomponentpartthatisused in
itsproductand incurredthe followingcosts:


















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25,000

 		


 

 
 
Variablemanufacturingoverhead

 		
 
 
20,000

 		


 

 
 
Fixedmanufacturingoverhead

 		
 
 
18,000

 		


 

 
 

 		
 
 
98,000

 		









Anothercompanyhasofferedtosellthesamecomponenttothecompanyfor$17.50
per
unit.The?xed
manufacturingoverheadconsists
mainlyofdepreciationonequipmentused
to
manufacturethepartand
wouldnotbereduced
ifthecomponentpartwaspurchasedfromtheoutside?rm.If
thecomponentpart is purchasedfromtheoutside?rm, WinstonCompanyhastheopportunitytouse
the
factoryequipment



toproduce
anotherproductthatisestimatedtohaveacontributionmarginof$19,000






Instructions



Prepareanincrementalanalysisforthismakeorbuydecision.Shouldthecomponentbe
madeor purchased?