1.Sheffield Corp. manufactures widgets. Embree Company has approached Sheffield with a proposal to sell the company widgets at a price of $130000 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:

Direct materials	$ 46500
Direct labor	43500
Manufacturing overhead	60000
Total	$150,000

The manufacturing overhead consists of $19000 of costs that will be eliminated if the components are no longer produced by Sheffield. From Sheffields point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

A. $20000 incremental cost.

B. $21000 incremental cost.

C. $20000 incremental savings.

D. $21000 incremental savings.

2. Bonita Industries produces 5000 units of part A12E. The following costs were incurred for that level of production:

Direct materials	$ 60000
Direct labor	165000
Variable overhead	80000
Fixed overhead	175000

If Bonita buys the part from an outside supplier, $45000 of the fixed overhead is avoidable. If the outside supplier offers a unit price of $73, net income will increase (decrease) by

A. $145000.

B. $(15000).

C. $(60000).

D. $85000.

3. Sheffield Corp. currently manufactures a wicket as its main product. The costs per unit are as follows:

Direct materials and direct labor	$15
Variable overhead	5
Fixed overhead	8
Total	$28

Saran Company has contacted Sheffield with an offer to sell it 4500 of the wickets for $22 each. If Sheffield makes the wickets, variable costs are $20 per unit. Fixed costs are $8 per unit; however, $5 per unit is unavoidable. Should Sheffield make or buy the wickets?

A. Make; savings = $9000

B. Make; savings = $4500

C. Buy; savings = $4500

D. Buy; savings = $13500

4. Swifty Corporation produces 1000 units of a necessary component with the following costs:

Direct Materials	$24000
Direct Labor	13000
Variable Overhead	6000
Fixed Overhead	7000

None of Swifty Corporations fixed overhead costs can be reduced, but another product could be made that would increase profit contribution by $8000 if the components were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the components, what is the maximum external price that Swifty Corporation would be willing to accept to acquire the 1000 units externally?

A. $45000

B. $51000

C. $52000

D. $38000