## Concord Corporation: Incremental Cost Analysis### Production Costs for 100,000 UnitsConcord Corporation manufactures widgets, and Bowden Company has proposed a deal to sell Concord the widgets at a price of $88,000 for 100,000 units. Below are the costs associated with Concord's production process for producing 100,000 units:- **Direct Material:** $33,000- **Direct Labor:** $29,500- **Manufacturing Overhead:** $48,500**Total Cost:** $111,000### Incremental Cost/Savings AnalysisIf Concord buys the widgets instead of making them, a manufacturing overhead cost of $12,150 will be eliminated. We need to determine the incremental cost or savings for Concord when deciding to buy the widgets from Bowden Company instead of producing them internally.### Calculation OptionsChoose the correct incremental cost or savings from the options below:- $ \boxed{\$23,000 \text{ incremental savings}} $- $ \boxed{\$13,350 \text{ incremental cost}} $- $ \boxed{\$10,850 \text{ incremental savings}} $- $ \boxed{\$23,000 \text{ incremental cost}} $### Steps to Determine Incremental Cost/SavingsTo solve for the incremental cost or savings, follow these steps:1. **Calculate the reduced manufacturing overhead if components are no longer produced:** $$ \text{Reduced Manufacturing Overhead} = \$48,500 - \$12,150 = \$36,350 $$ 2. **Calculate the total savings from not producing the widgets:** $$ \text{Total Cost of Production} = \$111,000 $$ $$ \text{Cost without Overhead Savings} = \$111,000 - \$12,150 = \$98,850 $$3. **Compare the cost of buying versus making:** Compare the cost of buying the widgets (\$88,000) with the cost of making them without the overhead savings (\$98,850).4. **Determine the Incremental Savings:** $$ \text{Incremental Savings} = \$98,850 - \$88,000 = \$10,850 $$Therefore, the incremental savings for Concord if the widgets are bought instead of made is $ \$10,850 $. ### ConclusionThe correct option is:\[ \boxed{\$10,850 \text

Decision making is the technique that helps the entity to choose the best one among the available…

Answered: Concord Corporation manufactures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
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