Each year, Brother Company purchases 40,000 zippers that it needs for production of its backpacks. The...

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Each year, Brother Company purchases 40,000 zippers that it needs for production of its backpacks. The supplier notified Brother Company that a price increase will take effect shortly, which will bring the price of the zipper to $2.50 per zipper. Brother Company is considering the use of idle facilities to produce the zippers. The annual production costs to produce the needed 40,000 zippers are as follows: $17,500 30,000 14,000 33,500 Direct materials Direct labor Indirect production costs variable Indirect production costs fixed The idle facilities could also be rented out at an annual rent of $12,000. All the fixed indirect production costs are avoidable. Brother Company is considering all its options regarding the zippers. 1. Should they start to make the zippers in their idle facility, should they continue to buy the zippers, or should they continue to buy the zippers and rent the idle facility? Discuss in detail; show all calculations for every alternative Brothers Company has regarding the zippers. What should Brothers Company do? Discuss the pros and cons of renting the idle facility. Each year, Brother Company purchases 40,000 zippers that it needs for production of its backpacks. The supplier notified Brother Company that a price increase will take effect shortly, which will bring the price of the zipper to $2.50 per zipper. Brother Company is considering the use of idle facilities to produce the zippers. The annual production costs to produce the needed 40,000 zippers are as follows: $17,500 30,000 14,000 33,500 Direct materials Direct labor Indirect production costs variable Indirect production costs fixed The idle facilities could also be rented out at an annual rent of $12,000. All the fixed indirect production costs are avoidable. Brother Company is considering all its options regarding the zippers. 1. Should they start to make the zippers in their idle facility, should they continue to buy the zippers, or should they continue to buy the zippers and rent the idle facility? Discuss in detail; show all calculations for every alternative Brothers Company has regarding the zippers. What should Brothers Company do? Discuss the pros and cons of renting the idle facility.

Answer rating: 100% (QA)

Solution Approach The avoidable cost should be compared with cost to buy If avoidable cost is low... View the full answer