RSW Company manufactures 17,000 units of wheel sets for use in its annual production. Cost are as follows:

Item	Cost
Direct Materials	$45,000
Direct labor	60,100
Variable manufacturing overhead	62,000
Fixed manufacturing overhead	73,000

Rayco Company has offered to sell RSW 17,000 units of wheel sets for $16 per unit. If RSW accepts the offer, some of the facilities presently used manufacture wheel sets could be rented to a third part at an annual rental of $32,500. In addition, $45,500 fixed overhead would be totally eliminated.

Prepare an incremental analysis schedule to demonstrate if RSW should accept Rayco’s offer.

	Make	Buy
Additional Rental Income	Amount	Amount
Costs
Direct materials	Amount	Amount
Direct labor	Amount	Amount
Variable manufacturing overhead	Amount	Amount
Fixed manufacturing overhead	Amount	Amount
Purchase cost	Amount	Amount
Total manufacturing cost	Amount	Amount

Should RSW make or buy the wheel sets? Explain.

Enter your response here.

Answer rating: 100% (QA)

RSW should make the wheel sets Because if RSW make wheel sets it will have lower costie 2... View the full answer