Bunny Company produces a part that is used in the manufacture of one of its products....

Bunny Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 11,000 units of this part are as follows:

Direct materials $25,000

Direct labor 34,000

Variable factory overhead 65,000

Fixed factory overhead 50,000

$174,000

Of the fixed factory overhead costs, $9,000 is avoidable.

Required:

a. Assuming there is no alternative use for the facilities, should Bunny Company take advantage of an offer from a supplier who is willing to sell Bunny Company 11,000 units of the same part for $12.50 per unit?

b. Would your answer to Part A change if the facilities could be rented for $10,000 a year?

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ekkarill92 answered 1 year ago

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