Swenson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows: Of the fixed factory overhead costs, $35,000 is avoidable.
Required:
a. Assuming there is no alternative use for the facilities, should Swenson take advantage of an offer from a supplier who is willing to sell Swenson 10,000 units of the same part for $64 per unit?
b. Would your answer to Part (a) change if the facilities could be rented for $50,000 a year?

Question

Swenson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:  Of the fixed factory overhead costs, $35,000 is avoidable.
Required:
a. Assuming there is no alternative use for the facilities, should Swenson take advantage of an offer from a supplier who is willing to sell Swenson 10,000 units of the same part for $64 per unit?
b. Would your answer to Part (a) change if the facilities could be rented for $50,000 a year?

Quizplus · Accepted Answer

The Answer of Swenson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:  Of the fixed factory overhead costs, $35,000 is avoidable.
Required:
a. Assuming there is no alternative use for the facilities, should Swenson take advantage of an offer from a supplier who is willing to sell Swenson 10,000 units of the same part for $64 per unit?
b. Would your answer to Part (a) change if the facilities could be rented for $50,000 a year?

Swenson Company Produces a Part That Is Used in the Manufacture