Question - RSW Company manufactures 10,000 units of wheel sets for use in its annual production. Costs are as follows: direct materials are $20,000; direct labor is $55,000; variable overhead is $45,000; and fixed overhead is $70,000. Rayco Company has offered to sell RSW 10,000 units of wheel sets for $18 per unit. If RSW accepts the offer, some of the facilities presently used to manufacture wheel sets could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to wheel sets would be totally eliminated.
Requirements: Prepare an incremental analysis schedule to demonstrate if RSW should accept Rayco's offer.