Old Camp Company manufactures awnings for its own line of tents. The company is currently...
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Old Camp Company manufactures awnings for its own line of tents. The company is currently operating at capacity and has received an offer from one of its suppliers to make the 12,000 awnings it needs for $22 each. Old Camps costs to make the awning are $10 in direct materials and $6 in direct labor. Variable manufacturing overhead is 75 percent of direct labor. If Old Camp accepts the offer $40,000 of fixed manufacturing overhead currently being charged to the awnings will have to be absorbed by other product lines Required 1. Complete the incremental analysis for the decision to make or buy the awnings in the table provided below Net Income Increase Decrease Make Buy Direct Materials Direct Labor Variable OH Fixed OH Purchase Pric Total 2. Should Old Camp continue to manufacture the awnings or should they purchase the awnings from the supplier? Purchase Manufacture 3. Assuming that the capacity released by purchasing the awnings allowed Old Camp to record a profit of $22,000, should Old Camp continue to manufacture or purchase the awnings? O Manufacture Purchase
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