question 1

The following are a product cost andconsidered prime costs for Bugs Bunny's Carrot Soup Company:

1. Carrots used in the soup
2. Wages paid to factory janitor
3. Salary paid to Bugs Bunny, president of the company

question 2

Megan's Motor Company manufactures part AUChamp used in several of its engine models. Annual production costs for 200,000 units are as follows:

Direct materials	$ 40,000
Direct labor	60,000
Variable FOH	30,000
Fixed FOH	70,000
Total costs	$ 200,000

It is estimated that $25,000 of the fixed FOH costs assigned to AUChamp will no longer be incurred if the company purchases the AUChamp from an outside supplier. If Megan purchases 200,000 AUChamp parts from an outside supplier for $0.85 per unit, she will be able to rent the space currently used to make AUChamp parts for $55,000 a year.

If Megan accepts the outside supplier's offer, the company's overall annual net income will: