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B2 - AB H make internally direct materials direct labor variable manufacturing overhead supervisor salary depreciation of the machine allocated factory level costs purchase price total costs $ 30,000 $ 22,000 $4,000 $ 8,900 $ 10,000 $ 18,000 $0 $ 92,900 purchase from outside supplier $0 $0 SO $ 8,900 $ 10,000 $ 14,400 $ 60,000 $ 93,300 since in purchase from outside supplier option, the total cost has increased by $400, we car say that the impact on profit would be $400 decrease if red flags are purchased from outside supplier. impact on profit = $ 400 decrease decision - the company should not purchase from outside supplier. reason - because the profit is decreasing by $400 4 decrease in profit if purchased from outside supplier rental revenue of the manufacturing space impact on profit = -$ 400 $5,000 $ 4,600 increase decision - the company should purchase from outside supplier. reason - because the profit is increasing by $4,600

D H make internally purchase from outside supplier direct materials 30000 direct labor 22000 variable manufacturing overhead 4000 supervisor salary 8900 depreciation of the machine 10000 allocated factory level costs 18000 purchase price total costs =SUM(D3:09) =D6 =D7 D8*80% =5000*12 =SUM(E3:E9) since in purchase from outside supplier option, the total cost has increased by $400, we can say that the impact on profit would be $400 decrease if red flags are purchased from outside supplier. 400 decrease impact on profit = decision - the company should not purchase from outside supplier.

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Reason-because the profit is decreasing by $400 decrease in profit if purchased from outside supplier rental revenue of the manufacturing space impact on profit = -400 5000 =F17+F18 increase decision - the company should purchase from outside supplier. reason - because the profit is increasing by $4,600

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