Rubble Company must decide whether to make or buy some of its components. The costs of producing 67,300 switches for its generators are as follows.
| Direct materials | $29,060 | Variable overhead | $45,120 |
| Direct labor | $46,734 | Fixed overhead | $79,640 |
Instead of making the switches at an average cost of $2.98 ($200,554 – 67,300), the company has an opportunity to buy the switches at $2.69 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
Prepare an incremental analysis.
Craft Corporation produces a single product. Last year, the company had a net operating income of $90,560 using absorption costing and $80,900 using variable costing. The fixed manufacturing overhead cost was $6 per unit. There were no beginning inventories. If 28,500 units were produced last year, then sales last year were:
a. 18,840 units
b. 26,890 units
c. 30,110 units
d. 38,160 units
