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