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PART V (10 points) Barnes Company manufactured 6,000 units of a component part that is used in its product and incurred the following costs: Direct materials $35,000 Direct labor 15,000 Variable manufacturing overhead 10,000 Fixed manufacturing overhead 20,000 $80,000 Another company has offered to sell the same component part to the company for $12.00 per unit. The fixed manufacturing overhead consists mainly of depreciation on the equipment used to manufacture the part and would not be reduced if the component part was purchased from the outside firm. If the component part is purchased from the outside firm, Barnes Company has the opportunity to use the factory equipment to produce another product which is estimated to have a contribution margin of $14,000. Instructions Prepare an incremental analysis report for Barnes Company which can serve as informational input into this make or buy decision. Solution Currently Being produced at $13.33 per unit. If it were to switch it we produced at a cost of (12*6000+6000)=$78,000 or $13 per unit. For a total savings of $2000 at this level of production. So, yes the firm should accept the offer from the other company. .

Bildung

Solution
Currently Being produced at $13.33 per unit.
If it were to switch it we produced at a cost of (12*6000+6000)=$78,000 or $13 per unit.
For a total savings of $2000 at this level of production. So, yes the firm should accept the offer
from the other company.

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