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Make or Buy Decision Exercise: City Company manufactured 6,000 units of a component pan 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 SB0.000 Another company has offered to sell the same component part to the company for $13 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 tim, City Company has the opportunity to use the factory equipment to produce another product which is estimated to have operating income of $22,000. Instructions Prepare an incremental analysis report for City Company which can serve as informational input into this make or buy decision Sell or Process Further Exercise: Chen Minerals processes materials extracted from mines. The most common raw material that it processes results in three joint products: Larco Marco, and Narco. Each of these products can be sold as is. or each can be processed further and sold for a higher price The company incues joint costs of $180,000 to process one batch of the raw material that produces the three joint products. The following cost and sales information is available for one batch of each product. Sales Value at Allocated Split-Off Point Joint Costs Cost to Sales Value of Process Further Processed Product Larco S200,000 $40,000 $110,000 $300,000 Marco 300,000 60,000 85.000 400,000 Narco 405,000 80,000 250,000 800,000 Instructions Determine whether each of the three joint products should be sold as is or processed further

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