Chapman Company Manufactures Widgets The Manufacturing Overhead Consists of $12,000 of Costs That Will

question 10

Multiple Choice

Chapman Company manufactures widgets.Embree Company has approached Chapman with a proposal to sell the company widgets at a price of $60,000 for 100,000 units.Chapman 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: $\begin{array} { l l } \text { Direct material } & \$ 23,000 \\\text { Direct labour } & 22,000 \\\text { Manufacturing overhead } & \underline { 3 0 , 0 0 0 } \\\text { Tatal } &\underline { \$ 75,000}\end{array}$ The manufacturing overhead consists of $12,000 of costs that will be eliminated if the components are no longer produced by Chapman.From Chapman's point of view, how much is the incremental cost or savings if the widgets are bought instead of made?

• A)$15,000 incremental savings
• B)$3,000 incremental cost
• C)$3,000 incremental savings
• D)$15,000 incremental cost

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Definitions:

Market-oriented Era

The Market-oriented Era is a phase in marketing history characterized by a focus on meeting customers' needs and desires, understanding market demand, and creating value through marketing activities.

Value-based Marketing

A marketing approach that focuses on delivering products and services based on the perceived value they provide to customers, aiming to maximize customer satisfaction and retention.

Marketing Mix

The combination of factors that can be controlled by a company to influence consumers to purchase its products, typically identified as product, price, place, and promotion.

Price

The amount of money required to purchase a good or service.