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May Company manufactures widgets. June Company has approached May with a proposal to sell the company widgets at a price of $125,000 for 100,000 units.
May Company manufactures widgets. June Company has approached May with a proposal to sell the company widgets at a price of $125,000 for 100,000 units. May is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: Direct materials $ 46,500 43,500 Direct labor Manufacturing overhead 60.000 Total $150,000 The manufacturing overhead consists of $46,000 of costs that will be eliminated if the components are no longer produced by May. From May's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? $11,000 incremental savings $19.000 incremental savings $11,000 incremental cost $19,000 incremental cost
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