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Question - Sunland Company manufactures widgets. Bowden Company has approached Sunland with a proposal to sell the company widgets at a price of $93480 for 100000 units. Sunland is currently making these components in its own factory. The following costs are associated with this part of the process when 100000 units are produced:
Direct material $35340
Direct labor 33060
Manufacturing overhead 45600
Total $114000
The manufacturing overhead consists of $18240 of costs that will be eliminated if the components are no longer produced by Sunland. From Sunland's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?
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