Respuesta :
The preparation of an incremental analysis report for Crane Company for the make-or-buy decision is as follows:
Incremental Analysis:
Make Buy
Direct materials $36,400
Direct labor 15,600
Variable overhead 10,400
Total variable costs $62,400 $81,120
Contribution margin (22,800)
Total incremental costs $62,400 $58,320
Incremental benefits of outsourcing = $4,080
What is a make-or-buy decision?
A make-or-buy decision is an outsourcing decision that considers the profitability of manufacturing or providing some goods or services internally in contrast to external production or outsourcing.
Every make-or-buy decision must be based on relevant costs. Relevant costs are costs that impact a decision.
Incremental analysis reports present the relevant costs and benefits in make-or-buy decisions.
The number of units manufactured = 6,240
Production costs:
Direct materials $36,400
Direct labor 15,600
Variable overhead 10,400
Total variable costs $62,400
Fixed overhead 20,800
Total costs = $83,200
Outside supplier's price per unit = $13
Contribution margin = $22,800
Incremental benefits of outsourcing vis-a-vis internal production = $4,080 ($58,320 - $62,400)
Thus, in this make-or-buy decision, we can advise Crane Company to outsource the manufacturing of the component to the outside supplier, given the incremental benefits of $4,080.
Learn more about make-or-buy decisions at https://brainly.com/question/15304126
#SPJ1