Shannon Inc has been manufacturing its own shades for itstable lamps. The company is currently operating at 100% ofcapacity. Variable manufacturing overhead is charged to productionat the rate of 50% of direct labor cost. The direct materials anddirect labor cost per unit to make the lamp shades are $4.00 and$6.00 respectively. Normal production is 40,000 of fixedmanufacturing overhead currently being charge to the lamp shadeswill have to be absorbed by other products
Instructions:
A. Prepare the incremental analysis for the decision to makeor buy the lamp shades
B. Should shannon Inc buy the lamp shades
C. Would your answer be different in (B) if the productive capacity released by not making the lamp shades could be used to produce income of $35,000 will have to be a bsorbed by other products