Calc, Inc. owns a machine that produces baskets for the gift packages the company sells. The company uses 600 baskets in production each month. The costs of making one basket is $4 for direct materials, $3 for variable manufacturing overhead, $2 for direct labor, and $5 for fixed manufacturing overhead. The unit cost is based on the monthly production of 900 baskets. The company determined that 30% of the fixed manufacturing overhead is avoidable. An outside supplier has offered to sell Calc the baskets for $13 each, and can supply all the units it needs.

Prepare an incremental analysis to determine if Calc should buy the baskets from the supplier.

Answer rating: 100% (QA)

Cost Structure of producing 900 units Particulars Cost per unit Monthly prod... View the full answer