Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125000 for 100000 units.Chapman 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: $$\begin{array} { l r }
\text { Direct materials } & \$ 46,500 \
\text { Direct labor } & 43,500 \
\text { Manufacturing overhead } & 60,000 \
\text { Total } & \$ 150,000 \
\hline
\end{array}$$ The manufacturing overhead consists of $24000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view how much is the incremental cost or savings if the widgets are bought instead of made?

Question

Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125000 for 100000 units.Chapman 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: $$\begin{array} { l r } 
\text { Direct materials } & \$ 46,500 \
\text { Direct labor } & 43,500 \
\text { Manufacturing overhead } & 60,000 \
\text { Total } & \$ 150,000 \
\hline
\end{array}$$ The manufacturing overhead consists of $24000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view how much is the incremental cost or savings if the widgets are bought instead of made?

Quizplus · Accepted Answer

The Answer of Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125000 for 100000 units.Chapman 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: $$\begin{array} { l r } 
\text { Direct materials } & \$ 46,500 \
\text { Direct labor } & 43,500 \
\text { Manufacturing overhead } & 60,000 \
\text { Total } & \$ 150,000 \
\hline
\end{array}$$ The manufacturing overhead consists of $24000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view how much is the incremental cost or savings if the widgets are bought instead of made?

Chapman Company Manufactures Widgets The Manufacturing Overhead Consists of $24000 of Costs That Will