Wilma Company must decide whether to make or buy some of its components. The costs of producing 60,500 switches for its generators are as follows.
| Direct materials | $29,600 | Variable overhead | $44,400 |
| Direct labor | $21,480 | Fixed ovcerhead | $83,600 |
Instead of making the switches at an average cost of $2.96 ($179,080/$60,500), the company has an opportunity to buy the switches at $2.70 per unit. If the company purchases the switches, all the variable costs and one-fourth of the fixed costs will be eliminated.
Prepare an incremental analysis showing whether the company should buy the switches.
Laredo manufactures Nuts and Bolts from a joint process (cost = $80,000). 5,000 pounds of Nuts can be sold at split-off for $20 per pound; 10,000 pounds of Bolts can be sold at split-off for $15 per pound. For product costing purposes, Laredo allocates joint costs using the relative sales value method.
The amount of joint cost allocated to Nuts would be:
A. $32,000
B. $40,000
C. $48,000
D. $60,000
E. $80,000
