Raymond Corporation Currently Manufactures 3000 Units of Component XYZ Annually

Essay

Raymond Corporation currently manufactures 3000 units of component XYZ annually for its main product. The costs per unit are as follows: $$\begin{array} { l r } \text { Direct materials } & \$ 4.00 \\\text { Direct labor } & 7.00 \\\text { Variable overhead } & 3.20 \\\text { Fixed overhead } & 7.00 \\\text { Total } & \$ 21.20 \\\hline\end{array}$$ Dorie Company has contacted Raymond with an offer to sell it 3000 components of XYZ for $17.40 each. Sixty percent of the fixed overhead per unit is unavoidable.
Instructions
Prepare an incremental analysis for the make-or-buy decision.