Marigold Corp. manufactures widgets. Bowden Company has approached Marigold with a proposal to sell the company...
Marigold Corp. manufactures widgets. Bowden Company has
approached Marigold with a proposal to sell the company widgets at
a price of $62320 for 100000 units. Marigold is currently making
these components in its own factory. The following costs are
associated with this part of the process when 100000 units are
produced:
| Direct material | $ 23560 |
| Direct labor | 22040 |
| Manufacturing overhead | 30400 |
| Total |
$76000 |
The manufacturing overhead consists of $12160 of costs that will be
eliminated if the components are no longer produced by Marigold.
From Marigold’s point of view, how much is the incremental cost or
savings if the widgets are bought instead of made?
$4560 incremental cost
$1520 incremental savings
$13680 incremental cost
$13680 incremental savings
Please try and explain the calculations!
thankssss
Homework Answers
Answer: $ 4,560 Incremental cost
Cost to Make the 100,000 Units = 76,000
Cost incurred to Buying the Units = Price + Unavoidable MOH = 62320+(30400-12,160) = 80,560
Loss on Bought the units = 80,560- 76,000 = 4,560 Incremental Cost
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