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1. Concord Corporation can produce 100 units of a component part with the following costs: Direct Materials $8000 Direct Labor 6500 Variable Overhead 9000 Fixed
1. Concord Corporation can produce 100 units of a component part with the following costs:
Direct Materials $8000
Direct Labor 6500
Variable Overhead 9000
Fixed Overhead 11000
If Concord Corporation can purchase the component part externally for $30000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision?
Buy and save $6500
Make and save $2500
Buy and save $500
Make and save $500
2. Waterway Industries manufactures widgets. Bowden Company has approached Waterway with a proposal to sell the company widgets at a price of $96760 for 100000 units. Waterway 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 $ 36580
Direct labor 34220
Manufacturing overhead 47200
Total
$118000
The manufacturing overhead consists of $18880 of costs that will be eliminated if the components are no longer produced by Waterway. From Waterways point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
$21240 incremental savings
$21240 incremental cost
$7080 incremental cost
$2360 incremental savings
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