|Question||All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments.
4. The lowest quotation for 8,000 CISCO units from a supplier is $80,000.
5. If CISCO units are purchased, freight and inspection costs would be $0.35 per unit, and receiving costs totaling $1,300 per year would be incurred by the Machining Department.
(a) Prepare an incremental analysis for CISCO. Your analysis should have columns for
1. Make CISCO,
2. Buy CISCO, and
3. Net Income Increase/(Decrease).
(a) NI (decrease) $(1,160)
(b) Based on your analysis, what decision should management make?
(c) Would the decision be different if Shatner Company has the opportunity to produce $3,000 of net income with the facilities currently being used to manufacture CISCO? Show computations.
(c) NI increase $1,840
(d) Image for the management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part o