(Answered) Question - talk company manufactures 25000 telephones per

Accounting

Question - Talk Company manufactures 25,000 telephones per year. The full manufacturing costs per telephone are as follows:

Direct materials $ 6

Direct labor 20

Variable manufacturing overhead 10

Average fixed manufacturing overhead 11

Total $47

The Telecom America has offered to sell Talk Company 25,000 telephones for $35 per unit. If Talk Company accepts the offer, $260,000 of fixed overhead will be eliminated.

Required: Applying differential analysis to the situation, should Talk Company make or buy the phones? For full credit (or partial credit if you make a mistake) you must show your calculations and label things clearly so I know what you are doing.

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