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B.B. Chick owns a factory that produces 22,000 eggs per year that are used for the production of their baskets. B.B. Chick has ample capacity
B.B. Chick owns a factory that produces 22,000 eggs per year that are used for the production of their baskets. B.B. Chick has ample capacity to produce these eggs. B.B. Chick was recently approached by an outside supplier (Chick E. Little) that offered to produce the eggs for $12 per egg. B.B. Chick has provided the following information about the costs associated with producing their eggs: Per unit costs Costs at production of 22,000 eggs Direct materials $7 $154,000 Direct labour $3 $66,000 Variable manufacturing $1 $22,000 overhead Allocated common Fixed $2 $44,000 manufacturing overhead Total $13 $286,000 What is the maximum price B.B. Chick would be willing to pay Chick E. Little for the eggs? $242,000 $264,000 $286,000 $222,000
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