Number 2 (a + B)

1. Hungry Bunny Company provide two services to its customers, Dine in and Drive Thru. The company is considering dropping its Drive Thru service. Dropping Drive Thru service is expected to increase the revenue for Dine in service 45% as a result, allow the company to eliminate the drive-thru window rental now costing 575 per month and save the company the salary of the staff working on the delive thru of $500 per month Hungry Bunny's other foed overhead costs will be the same under any alternative. The company records show the following budgeted income statement for the two services as follows: Dine-in Drive Thru Total Revenue $25.000 $ 20,000 $45,000 Direct material 6.250 5,000 11.250 Direct labor 5,000 2.000 8,000 Drive Thru Window rental 750 6,500 7,250 Other overhead costs 2.500 5.250 2.250 Operating income $10.200 $10.250 Required: Should Hungry Bunny Company drop its drive-thru service? Explain your answer using incrementat relevant information analysis. (8 marka) 250 2 Borka Leather Company is considering purchasing leather materials for the coming year to une in its production from two nuppleru: Majanco, and Rawati Shofar Company. Each supplier. provided the following information: Malanca offers sales of batches over the year of 5000 units of input per batch for a price of 3/unit Rawab Chofar Company offers a monthly batch salt over the year of 2,500 units of input per month for a price of 85.25 per unit Euch batch purchase order will cost Barka 990 per batch and purchases will be used uniformly during the year. The annual rate of return for cath invested with the same nisk an investment in 3. Analyze the two offers using the opportunity cost approach and comment on which offer should be accepted by Barka Leather Company, (7 marks) b. What other.ceste related to inventory holding should be considered as well (1 mark) Inventory is 111