Bramble Company manufactures widgets. Blossom Company has approached Bramble with a proposal to sell the company widgets at a price of $60500 for 100,000 units. Bramble 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 23000 Manufacturing overhead 29000 Total $74700
Bramble Company manufactures widgets. Blossom Company has approached Bramble with a proposal to sell the company widgets at a price of $60500 for 100,000 units. Bramble 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 23000 Manufacturing overhead 29000 Total $74700
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Bramble Company manufactures widgets. Blossom Company has approached Bramble with a proposal to sell the company widgets at a price of $60500 for 100,000 units. Bramble 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:
The manufacturing overhead consists of $12300 of costs that will be eliminated if the components are no longer produced by Bramble. From Bramble’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
| Direct material | $22700 |
| Direct labour | 23000 |
| Manufacturing |
29000 |
| Total | $74700 |
The manufacturing overhead consists of $12300 of costs that will be eliminated if the components are no longer produced by Bramble. From Bramble’s point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
$14200 incremental savings
$2500 incremental savings
$2500 incremental cost
$14200 incremental cost
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