Carlsen company manufactured 6000 units of a component part, Ask an Expert

Accounting

Carlsen Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs:

Direct material 70,000
Direct labor 30,000
Variable manufacturing overhead 20,000
Fixed manufacturing overhead 40,000
Total 160,000

Another company has offered to sell the same component part to the company for $24 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, Carlsen Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $30,000.

Instructions: Perepare an incremntal analysis report for Carlsen Company, which can serve as informational input into this make-or-buy decision.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9979745

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