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Sagot :
Msi should continue to make control module because buying the control module will result into incremental cost of $11,000 to the msi.
Differential analysis
1. Differential analysis
Buy control module (Alt 1) or Make control module (Alt 2)
Buy control module Make control module Differential effect on cost
(Alt 1) (Alternative 2) (Alternative 2)
Purchase price $187,000 - ($187,000)
(11,000×$17)
Direct materials $0 $88,000 $88,000
(11,000×$8)
Direct labor $0 $44,000 $44,000
(11,000×$4)
Variable overhead $0 $44,000 $44,000
(11,000×$4)
Fixed overhead $44,000 $44,000 $0
(11,000×$8)
Total cost $231,000 $220,000 ($11,000)
Difference in cost $11,000
2. Based on the above differential anaylsis msi should continue to make control module reason being that buying the control module will result into incremental cost of $11,000 to the msi.
3a. Differential analysis
Buy control module (Alt 1) or Make control module (Alt 2)
Buy control module Make control module Differential effect on cost
(Alt 1) (Alternative 2) (Alternative 2)
Purchase price $187,000 - ($187,000)
(11,000×$17)
Direct materials $0 $88,000 $88,000
(11,000×$8)
Direct labor $0 $44,000 $44,000
(11,000×$4)
Variable overhead $0 $44,000 $44,000
(11,000×$4)
Fixed overhead $44,000 $44,000 $0
(11,000×$8)
Less profit from new product line
($41,000) $0 $41,000
Total cost $190,000 $220,000 $30,000
Difference in cost $30,000
3b. Based on the above differential anaylsis msi should buy the control module reason being that buying the control module will result into incremental savings of $30,000 to the msi. The recommendation to msi is changed based on the new scenario.
Inconclusion Msi should continue to make control module because buying the control module will result into incremental cost of $11,000 to the msi.
Learn more about differential analysis here:https://brainly.com/question/23910901
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