Question 2 Buddy Pets has recently started to manufacture talking toy pets. The cost structure to manufacture 13,400 of these toy pets is as follows: Direct materials ($34 per pet) Direct labour ($30 per pet) Variable overhead ($9 per pet) Allocated fixed overhead ($24 per pet) Total $455,600 402,000 120,600 321,600 $1,299,800 Buddy Pets is approached by Maxum Inc., which offers to make the toy pets for $83 per unit. Using incremental analysis, determine whether Buddy Pets should accept this offer under each of the following independent assumptions: Prepare an incremental analysis. Assume that $120,600 of the fixed overhead cost in making 13,400 of the toy pets) is avoidable. (Enter savings with a negative sign preceding the number e.g. -15,000 or parenthesis, e.g. (15,000).) Cost Make Buy Cost (Saving) $ $ $ Total annual cost $ $ $ Should Buddy Pets continue to make the pets or buy the pets? Buddy Pets should the pets. Prepare an incremental analysis. Assume that none of the fixed overhead is avoidable. However, if the pets are purchased from Maxum, Buddy Pets can use the released productive resources to generate additional income of $207,600. (Enter savings with a negative sign preceding the number e.g. - 15,000 or parenthesis, e.g. (15,000).) Cost Make Buy Cost (Saving) $ Total annual cost : Opportunity cost Total cost Should Buddy Pets continue to make the pets or buy the pets? Buddy Pets should the pets