RSW Company manufactures 15,000 units of wheel sets for use in its annual production. Costs are as follows:
Direct materials 42,000 Direct Labor 63,000 Variable manufacturing overhead 58,000 Fixed manufacturing overhead 76,000 Rayco Company has offered tosell RSW 15,000 units of wheel sets for 14 per unit.
if RSW accepts the offer, some of the facilities presently used to manufacture wheels sets could be rented to a third party at an annual rental of 25,500. in addition 43,000 of fixed overhead would be totally eliminated.
Prepare an incremental analysis schedule to demonstrate if RSW should accept Rayco's offer
| Make | Buy |
| Additional Rental Income |
Amount |
Amount |
| Costs |
|
|
| Direct materials |
Amount |
Amount |
| Direct labor |
Amount |
Amount |
| Variable manufacturing overhead |
Amount |
Amount |
| Fixed manufacturing overhead |
Amount |
Amount |
| Purchase cost |
Amount |
Amount |
| Total manufacturing cost |
Amount |
Amount |
Should RSW make or buy the wheel sets? Explain