Problem 4 Bun's Sweet Pies and Bakery uses only the finest ingredients in its products and sells their treats to restaurants in the region as well as to walk in customers. They currently make all their own cheesecakes. Bun's Accounting Department reports the following costs of producing the 680 cheesecakes that are needed every year. Direct materials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Per Unit $9.00 $5.00 $9.90 $3.80 $3.20 $1.70 Brian's Bakery, another small business in the area, has offered to provide cheesecakes to Bun at a cost of $31.00 per cheesecake. This would allow Bun to focus production on specialty breads like Apple Scrapple and Cinnamon Burst and to expand into the gourmet cookie market. The additional operating income from the new items is expected to be $1,450 per year. Brian's cheesecakes would be made with organic ingredients only. If Bun accepts Brian's offer, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment (industrial quality spring form pans) used to make the cheesecakes was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the Brian's offer were accepted, only $3,000 of these allocated general overhead costs would be avoided. a. Prepare a report that shows the financial impact of buying part 289 from the supplier rather than continuing to make it inside the company. b. Which alternative should the company choose? Explain and support your answer with data from your report