Scrooge Company Produces a Part That Is Used in the Manufacture

question 128

Essay

Scrooge 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: $\begin{array}{ll}\text { Direct materials } & \$ 25,000 \\\text { Direct labor } & 34,000 \\\text { Variable factory } & 65,000 \\\text { overhead } & \\\text { Fixed factory overhead } & \underline{50,000}\\&\$174,000\end{array}$ Of the fixed factory overhead costs, $9,000 is avoidable. Required:
a. Assuming there is no alternative use for the facilities, should Scrooge Company take advantage of an offer from a supplier who is willing to sell Scrooge 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?

---

Definitions:

Occupational Safety

The practices and regulations implemented to ensure the health and safety of employees in the workplace.

Health Act

Legislation that provides guidelines and regulations to ensure the safety, well-being, and health protection of individuals in the workplace or public spaces.

Americans With Disabilities Act

A civil rights law that prohibits discrimination based on disability in areas such as employment, public accommodations, and telecommunications.

Equal Employment Opportunity

The principle that all individuals should have equal access to work opportunities, free from discrimination.