6. Emily Company manufactures kitchen utensils. Bob Company has approached Emily

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6. Emily Company manufactures kitchen utensils. Bob Company has approached Emily with a proposal to sell the company spatulas at a price of $100,000 for 100,000 units. Emily is currently making the spatulas in its own factory. The following costs are associated with this part of the process when 100,000 spatulas are produced: Direct material $ 41,000 Direct labor 19,000 Manufacturing overhead 50,000 Total $110,000

The manufacturing overhead consists of $36,000 of costs that will be eliminated if the components are no longer produced by Emily. From Emily's point of view, how much is the incremental cost or savings if the spatulas are bought instead of made? (Answer: $4,000 incremental cost)

7. Oliver Co. is contemplating the replacement of an old machine with a new one. The following information has been gathered: Old Machine New Machine Cost $250,000 $500,000 Accumulated Depreciation 75,000 -0- Remaining useful life 10 years -0- Useful life -0- 10 years Annual operating costs $200,000 $150,500 If the old machine is replaced, it can be sold for $20,000. The net advantage (disadvantage) of replacing the old machine is: (Answer: $15,000)

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6. Emily Company manufactures kitchen utensils. Bob Company has approached Emily

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