# Variable manufacturing overhead Assignment | College Homework Help

Pottery Ranch Inc. has been manufacturing its own finials for its curtain rods. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate of 69% of direct labor cost. The direct materials and direct labor cost per unit to make a pair of finials are \$4 and \$5, respectively. Normal production is 25,400 curtain rods per year.

A supplier offers to make a pair of finials at a price of \$13.30 per unit. If Pottery Ranch accepts the supplier’s offer, all variable manufacturing costs will be eliminated, but the \$40,400 of fixed manufacturing overhead currently being charged to the finials will have to be absorbed by other products.

(a)

#### How many pages is this assigment?

Prepare an incremental analysis to decide if Pottery Ranch should buy the finials. (Round answers to 0 decimal places, e.g. 1250. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

 Make Buy Net Income Increase (Decrease) Direct materials \$ \$ \$ Direct labor Variable overhead costs Fixed manufacturing costs Purchase price Total annual cost \$ \$ \$

(b)

Should Pottery Ranch buy the finials?