1 answer

Sheffield Corp. manufactures widgets. Bowden Company has approached Sheffield with a proposal to sell the company...

Question:

Sheffield Corp. manufactures widgets. Bowden Company has approached Sheffield with a proposal to sell the company widgets at

Sheffield Corp. manufactures widgets. Bowden Company has approached Sheffield with a proposal to sell the company widgets at a price of $103320 for 100000 units. Sheffield 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: $39060 36540 Direct material Direct labor Manufacturing overhead Total 50400 $126000 The manufacturing overhead consists of $20160 of costs that will be eliminated if the components are no longer produced by Sheffield. From Sheffield's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? are no longer produced by Shethe. From lefield's point of view, how much isthe incremental cost or savings $7560 incremental cost $22680 incremental cost $2520 incremental savings $22680 incremental savings

Answers

Cost of Making Cost of Buying Increase/Decrease in Income
Direct materials 39,060 0 39,060
Direct labor 36,540 0 36,540
Manufacturing overhead 50,400 30,240 20,160
Outside Supplier's price 0 103,320 -103,320
Total Cost 126,000 133,560 -$7,560

$7,560 incremental cost.

first option is correct option.

Kindly comment if you need further assistance.

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