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prepare an incremental analysis to determine whether calvin should make or buy ekrob 609018

Calvin Company manufactures its own subassembly units known by the code name “ekrob.” Calvin incurs the following annual costs in producing 40,000 ekrobs:

Direct materials

$ 60,000

Direct labor


Variable overhead


Fixed overhead




Calvin can purchase the ekrobs from Hobbes Corporation for $6.00 per unit. If they purchase the ekrobs, only $30,000 of the fixed overhead will be eliminated. However, the vacant factory space can be used to increase production of another product, which would generate annual income of $22,000.


Prepare an incremental analysis to determine whether Calvin should make or buy ekrobs.

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