Whipple Company manufactures widgets. Cates Manufacturing has approached Whipple

Question

Whipple Company manufactures widgets. Cates Manufacturing has approached Whipple with a proposal to sell the company widgets at a price of $160,000 for 100,000 units. Whipple 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:

$40,000 incremental savings

$8,000 incremental savings

$8,000 incremental cost

$40,000 incremental cost

Direct material $ 62,000 Direct labor 58,000 Manufacturing overhead 80,000 Total $200,000

Explanation / Answer

$8,000 incremental savings

$8,000 incremental savings

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