Q8

Waterway Company manufactures widgets. Carla Vista Company has approached Waterway with a proposal to sell the company widgets at a price of $60100 for 100,000 units. Waterway 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 material $22700 Direct labour 21600 Manufacturing overhead 30500 Total $74800 The manufacturing overhead consists of $12600 of costs that will be eliminated if the components are no longer produced by Waterway. From Waterway's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? $14700 incremental savings $3200 incremental cost O $14700 incremental cost $3200 incremental savings