Company manufactures various-sized plastic bottles for its medicinal product. The manufacturing cost for small bottles is $55 per unit (100 bottles), including fixed costs of $10 per unit. A proposal is offered to purchase small bottles from an outside source for $32 per unit, plus $2 per unit for freight.
Compare a differential analysis dated February 18 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles, assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". Enter unit costs as positive values. Use a minus sign to indicate negative Differential Effects.
Differential Analysis
Make (Alt. 1) or Buy (Alt. 2) Bottles
February 18
Unit costs:
Purchase price
Freight
Variable costs
Fixed factory overhead
Total unit costs
Make
Bottles
(Alternative 1)
0
Buy
Bottles
(Alternative 2)
32
2
Determine whether the company should make (Alternative 1) or buy (Alternative 2) the bottles.
Buy the bottles
