View the step-by-step solution to:

Schopp Inc. has been manufacturing its own shades for its table lamps.

Schopp Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 70% of direct labor cost. The direct materials and direct labor cost per unit to make the lamp shades are $3.57 and $4.70, respectively. Normal production is 33,900 table lamps per year.

A supplier offers to make the lamp shades at a price of $13.50 per unit. If Schopp Inc. accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the $44,460 of fixed manufacturing overhead currently being charged to the lamp shades will have to be absorbed by other products.

Prepare the incremental analysis for the decision to make or buy the lamp shades. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Should Schopp Inc. buy the lamp shades?

Would your answer be different in (b) if the productive capacity released by not making the lamp shades could be used to produce income of $83,216?

Sign up to view the entire interaction

Top Answer

Hi please find the attached... View the full answer

8545007.xlsx

Incremental analysis
Particulars Make Buy Net Income Increase
(Decrease)
Direct Material
3.57
0
3.57
Direct labour
4.7
0
4.7
Manufacturing Overheads
3.29
0
3.29
Fixed manufacturing cost
0
0
0...

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Ask a homework question - tutors are online