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    Differential analysis for make or buy

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    Company A manufactures 5,000 cell phones a year. The manufacturing costs are as follows:
    Direct materials $ 2
    Direct labor 8
    Variable manufacturing overhead 5
    Average fixed manufacturing overhead 5
    Total $20

    Company B offered to sell Company A 5,000 cell phones for $17 per unit. If Company A accepts the officer, $20,000 of fixed overhead will be eliminated. Apply differential analysis to the situation to determine if Company A should make or buy the phones.

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    https://brainmass.com/business/accounting/differential-analysis-buy-230267

    Solution Preview

    Company A manufactures 5,000 cell phones a year. The manufacturing costs are as follows:
    Direct materials $ 2
    Direct labor 8
    Variable manufacturing overhead 5
    Average fixed ...

    Solution Summary

    Response helps in providing the steps for doing the differential analysis for make or buy the phones.

    $2.19

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