Make
Alternative 1 - Produce In-House
Direct Materials per case
Direct Labor per case
Variable Overhead per case
Total Variable costs per case
Additional Fixed costs (per year)
Selling Price Per Case
Number of cases
Sales
Total variable costs
Contribution margin
Total fixed costs
Net operating income
Contribution margin ratio
Break-even
A
B
C
D
E
G
H
M
4 Make Buy Alternative 1 - Produce In-House Alternative 2 - Outsource Production 6 Direct Materials per case $1.75 Purchase price per case $13.05 7 Direct Labor per case $2.25 Variable Overhead per case $0.10 Variable Overhead per case $3.60 Total Variable costs per case $13.15 Total Variable costs per case $7.60 10 Additional Fixed costs (per year) $6,000 11 Additional Fixed costs (per year) $37,640 12 13 Selling Price Per Case $16.50 14 15 16 Make Buy Make Buy Make 17 Number of cases 3,000 3,000 6,000 6,000 12,000 18 Sales 19 Total variable costs 20 Contribution margin 21 Total fixed costs 22 Net operating income 23 24 25 Make Buy 26 Contribution margin ratio 27 Break-even 28 29 30 1) If 3,000 units of Root Beer are produced and sold during the year, which option will provide the highest Net Operating Income (Make or Buy)? 31 32 2) If 12,000 units of Root Beer are produced and sold during the year, which option will provide the highest Net Operating Income (Make or Buy)? 34 35 36 3) What is the break-even point (in units) if the company Makes the Root Beer in-house?
Buy 12,000
/2
/2
14
38
14
40 41 42 43
/8
