Question - RSW Company manufactures 17,000 units of wheel sets for use in annual production. Costs are as follows:
|
Item
|
Cost
|
|
Direct material
|
$45,000
|
|
Direct labor
|
60,100
|
|
Variable manufacturing overhead
|
62,000
|
|
Fixed manufacturing overhead
|
73,000
|
Rayco Company has offered to sell RSW 17,000 units of wheel sets for $16 per unit. If RSW accepts the offer, some of the facilities presently used to manufacturing wheel sets could be rented to a third party at an annual rental of $32,500. In addition, $45,500 of fixed overhead would be totally eliminated.
Requirements: Prepare an incremental analysis schedule to demonstrate if RSW should accept Rayco's offer.