## 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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