-$5040 is the incremental cost. The marginal cost, or the price of producing more, is the variation in the overall cost that results from increasing the quantity produced.
The overall expense incurred as a result of producing one extra unit of a product is known as the incremental cost. The cost of an incremental unit of production is calculated by examining the additional costs incurred during the production process, such as raw materials.
The marginal cost function is the derivative of the total cost function, C(x). To find the marginal cost, derive the total cost function to find C'(x).
You can also write this as dC/dx, which makes it easier to understand the units of cost per item.
Direct Costs relating to in-house manufacturing (of 100,000 units) are as follows:
Direct material = $26,040
Direct labour = 24360
Manufacturing overhead directly related to the manufacture of the widgets: $13440.
Therefore, total direct costs = $63,840.
Accordingly, producing in-house ($63,840 direct cost) is more cost effective that buying from Bowden Company ($68,880) by -$5040.
The incremental cost if the widgets are bought instead of made is therefore -$5040
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