1. Label the following sheetsDocumentation, Variables, Worksheet

2. Documentation: Your name, the name of the problem, and the date

3. Variables: All numbers given in the problem. You will need all the variables to prepare the worksheets.

4. Prepare a Make or Buy Worksheet. Follow this set -up.

Cost to purchase tops:

Cost avoided by purchasing the tops:

Advantage or disadvantage of purchasing

5. Check figures: Total costs avoided, $618,000; Per unit purchase price, $420.

Make or Buy Allen Corporation currently makes the nylon convertible top for its main product, a fiberglass boat designed especially for water skiing. The costs of producing the 1,500 tops needed each year follow: Dustin Company, a specialty fabricator of synthetic materials, can make the needed tops of comparable quality for $390 each, F.O.B. shipping point. Allen would furnish its own trademark insignia at a unit cost of $12. Transportation would be $18 per unit, paid by Allen Corporation. Allen's chief accountant has prepared a cost analysis that shows that only 20% of fixed overhead could be avoided if the tops are purchased. The tops have been made in a remote section of Allen's factory building, using equipment for which no alternate use is apparent in the foreseeable future