Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the...
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Accounting
Chapman Company manufactures widgets. Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $125,000 for 100,000 units. Chapman is currently making these components in its own factory. The company has no alternative use for the facility.
The following costs are associated with this part of the process when 100,000 units are produced:
Direct materials $ 46,500
Direct labor 43,500
Fixed Overhead 60,000
Total $150,000
The correct decision would be to:
| a. | Buy and save $25,000. | |
| b. | Buy and lose $25,000. | |
| c. | Continue to make and save $35,000. | |
| d. | Continue to make and lose $35,000. |
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