AC239 Unit 10 Make-or-Buy Decision Analysis Example

Reviewed by Chester Goodwin, MBA Managerial Accounting Purdue University Global Free custom sample in 24 to 48h

Whether to keep sewing removable bed covers or buy 20,000 a year at $16.40 is the decision in this AC239 Unit 10 incremental decision analysis for the composite pet bed company used throughout this course. Purdue Global AC 239, Managerial Accounting, often closes with a decision, and BS in Accounting students sort every cost into relevant or not before recommending. The full in-house cost is $19.30 per cover, but depreciation on owned machines and allocated plant overhead would continue either way. Relevant costs total $16.90, including a supervisor's salary that buying would eliminate. Buying saves $10,000 a year, and $36,000 once freed space makes crate pads with $26,000 of contribution. A highlighted note shows why the full-cost comparison overstates the saving, and the recommendation adds quality, timing and staffing terms.

CourseAC239 Managerial Accounting
UnitUnit 10
Paper typeIncremental decision analysis
LengthAbout 640 words, 5 pages double-spaced
FormatAPA 7 student paper
SchoolPurdue University Global
ProgramBS in Accounting
UpdatedOctober 2026

Free sample paper for AC239 Unit 10

1

Buy the Covers, Use the Space: A Unit 10 Make-or-Buy Analysis for a Dog Bed Maker's Sewn Covers

[Student Name]

Purdue University Global

AC239: Managerial Accounting

Unit 10 Incremental Decision Analysis

[Instructor Name]

[Date]

Burrow Bedworks, the supplier's quote and all figures are composite; the textbook and the decision-making studies cited are real.

What this part is doingStating the offer, both savings figures and the qualitative check in the lead shows the analysis reaches a decision.
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Cost Inventory, Making the Covers

Each cost is listed per cover at 20,000 covers a year, with a verdict.

1. Cover fabric, $7.20: relevant; it would no longer be bought.

2. Zippers, $0.90: relevant; avoided if the covers are bought.

3. Direct labor for sewing, $5.10: relevant; the sewing operators would be reassigned or the hours cut.

4. Variable overhead, thread, needles and machine power, $1.30: relevant; it stops when sewing stops.

5. Sewing supervisor's salary, $48,000 a year or $2.40 per cover: relevant; the position would be eliminated if the covers are bought.

6. Depreciation on the sewing machines, $18,000 a year or $0.90: not relevant; the machines are already owned, the cost is sunk, and they have no resale value.

7. Allocated plant overhead, $1.50: not relevant; rent, insurance and the plant manager's salary continue whether the covers are made or bought.

Full cost per cover: $19.30. Relevant cost per cover: $7.20 plus $0.90, $5.10, $1.30 and $2.40, or $16.90.

Incremental Table, Per Year

1. Fabric: make $144,000; buy $0; difference $144,000 in favor of buying.

2. Zippers: make $18,000; buy $0; difference $18,000.

3. Direct labor: make $102,000; buy $0; difference $102,000.

4. Variable overhead: make $26,000; buy $0; difference $26,000.

5. Supervisor's salary: make $48,000; buy $0; difference $48,000.

6. Supplier's price: make $0; buy $328,000; difference $328,000 in favor of making.

7. Contribution from crate pads made in the freed space: make $0; buy $26,000 gained; difference $26,000 in favor of buying.

Net difference: relevant costs of making, $338,000, against buying, $328,000 less the $26,000 crate pad contribution, or $302,000. Buying is $36,000 a year better.

Comparing the supplier's $16.40 with the full cost of $19.30 would overstate the saving at $58,000 a year, because $2.40 of the full cost, depreciation and allocated overhead, would continue whichever choice the company makes.

What this part is doingThe highlighted sentence exposes the most common error in make-or-buy analysis, which is what the unit tests.
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What the Numbers Leave Out

1. Quality. Covers are what customers see and wash. The contract should specify fabric weight, stitch density and zipper brand, with the right to reject a lot.

2. Timing. The holiday quarter needs 8,000 covers in ten weeks. The contract should commit the supplier to that peak with a penalty for late delivery.

3. People. Five sewing operators would lose their current work. Two can be moved to the crate pad line; the company should decide in advance what it offers the other three.

4. Reversibility. Selling the machines would make the decision hard to undo; keeping them for a year costs nothing but space.

Relevant costing is about future costs that differ between alternatives; sunk and unavoidable costs drop out (Franklin et al., 2019). The supervisor's salary is relevant only because the position would be eliminated; if she were kept, the saving would vanish. The test is whether a cost can be attributed to the activity, that is, whether it would disappear if the activity stopped (Shillinglaw, 1963). Opportunity costs such as the crate pad contribution belong in the table even though they appear in no ledger.

Recommendation

Buy the covers under a one-year contract that sets quality terms and a holiday delivery commitment, move two operators to crate pads, keep the sewing machines through the first year, and review the decision after the holiday quarter. Survey evidence shows that executives lean heavily on simple cash comparisons when they decide (Graham & Harvey, 2001), and this decision is exactly that kind of comparison, so a written review date matters: it lets the company check whether the $36,000 actually appeared.

What this part is doingEnding with a contract, a staffing plan and a review date turns the analysis into a decision that can be carried out.
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References

Franklin, M., Graybeal, P., & Cooper, D. (2019). Principles of accounting, volume 2: Managerial accounting. OpenStax. https://openstax.org/details/books/principles-managerial-accounting

Graham, J. R., & Harvey, C. R. (2001). The theory and practice of corporate finance: Evidence from the field. Journal of Financial Economics, 60(2-3), 187-243. https://doi.org/10.1016/S0304-405X(01)00044-7

Shillinglaw, G. (1963). The concept of attributable cost. Journal of Accounting Research, 1(1), 73-85. https://doi.org/10.2307/2489843

Reading the AC 239 Unit 10 instructions

The final AC239 unit typically gives a make-or-buy, drop-a-segment or special-order decision and asks for an incremental analysis. List every cost the problem gives and decide whether each is relevant, meaning it would change between the alternatives, with a short reason. Sunk costs and unavoidable allocated costs drop out. Avoidable fixed costs, such as a salary that would end, stay in. Include opportunity costs, such as contribution from using freed capacity. Build an incremental table with columns for each alternative and the difference, using only relevant items. Sum to one figure that favors an option. Then weigh what the numbers leave out: quality, reliability, timing, people and reversibility. End with a recommendation that can be carried out. Cite the textbook and research in APA 7.

Inside the AC239 Unit 10 example

The sample's cost inventory lists fabric, zippers, labor, variable overhead, the supervisor's salary, machine depreciation and allocated overhead, each with a verdict. Relevant cost reaches $16.90 against a full cost of $19.30. The incremental table puts each item in make and buy columns and adds the crate pad contribution, reaching a $36,000 advantage for buying. The highlighted sentence explains why using full cost would claim $58,000. Four qualitative factors follow, covering quality terms, the holiday peak, five sewing operators and keeping the machines for a year. Paragraphs cite the textbook and research on attributable cost. The recommendation sets a one-year contract and a review date, citing survey evidence on cash-based decisions.

AC239 Unit 10 rubric: what earns full points

Incremental analyses are graded on correct relevance verdicts, a correct table and a sound recommendation. Sunk depreciation and unavoidable allocated overhead must be excluded. Avoidable fixed costs must be included. Opportunity costs from freed capacity often carry their own points. The difference column must sum correctly. Comparing a supplier's price with full cost is a common error graders look for. The qualitative section earns credit when it could change the decision. A recommendation with conditions shows judgment. Clear tables and APA 7 citations complete the score for the course's final unit.

AC239 Unit 10 help from the desk

The most frequent make-or-buy error is comparing the supplier's price with full absorption cost, which counts costs that will not disappear. Others drop a fixed cost that would actually be avoided, such as a supervisor's salary. Opportunity costs are ignored. Depreciation is treated as relevant because it appears on the cost sheet. The qualitative section lists generic risks without tying them to the decision. Recommendations stop at buy or make, with no contract terms, staffing plan or review date that would let the company carry them out. If your decision problem includes several costs that may or may not be avoidable, our team can sort them and build the analysis from your figures.

Get an AC239 Unit 10 example written to your instructions

Whatever shape the Unit 10 proposal takes in your section, make or buy, a segment to drop or a special order, send it with every cost the problem lists and the rubric. Each cost is classified with a reason before the table is built. The analysis returns within 24-48h, and the first custom sample is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.

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AC239 Unit 10 questions, answered

What changes if the proposal is to drop a product line instead?

The same test applies, but the costs that pass are different. Dropping a line loses its revenue and its variable costs, saves only the fixed costs that would truly disappear, and often leaves allocated overhead to be absorbed by the remaining lines. The sample's structure carries over: cost inventory with verdicts, an incremental table, and a recommendation that addresses effects on the lines that remain.

When is depreciation relevant?

Almost never as depreciation itself, since it spreads a cost already incurred. What can be relevant is the cash the equipment would bring if sold, or a replacement purchase one option would require. If the problem says the machine could be sold for a stated amount on outsourcing, that amount enters the buy column as a cash inflow, and the sample labels it that way.

How long should the qualitative section be?

Long enough to change the recommendation if it should. When the incremental difference is large, a few sentences on supplier risk and quality suffice. When it is small, those factors may decide the case, and the section grows accordingly. AC239 rubrics usually reward a definite recommendation that acknowledges the factors over a balanced list that never commits.

Where can I find a free AC239 Unit 10 sample paper?

This page holds a complete AC239 Unit 10 incremental decision analysis on whether a dog bed maker should buy its covers, sorting each cost and recommending a contract with conditions.

Why is depreciation excluded in the AC239 Unit 10 sample?

The sewing machines are already owned and have no resale value, so their cost is sunk. Depreciation of $18,000 a year continues whether the covers are made or bought.