Answers
1) Differential analysis
Make | Buy | |
Direct material | 144000 | |
Direct labor | 96000 | |
Variable overhead | 24000 | |
Fixed overhead (108000/3) | 36000 | |
Purchase cost (12000*30) | 360000 | |
Total relevant cost | 300000 | 360000 |
Financial (disadvantage) = 300000-360000 = -60000
2) No
3) Differential analysis
Make | Buy | |
Direct material | 144000 | |
Direct labor | 96000 | |
Variable overhead | 24000 | |
Fixed overhead (108000/3) | 36000 | |
Opportunity Cost | 120000 | |
Purchase cost (12000*30) | 360000 | |
Total relevant cost | 420000 | 360000 |
Financial advantage = 420000-360000 = 60000
4) Yes
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