Question

Tyear of a part it uses in the products it this part is computed as follows: Ahrends Corporation makes 70,000 units per year of a part it uscs manufactures. The unit product cost of this part is computed as $ 17.80 19.00 1.00 17.10 $ 54.90 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost An outside supplier has offered to sell the company all of these parts it ne the company accepts this offer, the facilities now being used to make the part make more units of a product that is in high demand. The additional contribution na other product would be $273,000 per year. all of these parts it needs for $48.50 a unit. If ng used to make the part could be used to additional contribution margin on this If the part were purchased from the outside supplier. 88.20 of the fixed manufacturing cost being applied to the part would continue even if the part were purchased from the ou supplier. This fixed manufacturing overhead cost would be applied to the company's reman products. 41) What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 70,000 units required each year? A) $50.60 per unit B) $3.90 per unit C) $58.80 per unit D) $54.90 per unit

Answer 1

Calculate maximum amount that the company should pay

Direct material	17.80
Direct labor	19
Variable manufacturing overhead	1
Fixed overhead (	8.9
Opportunity Cost (273000/70000)	3.90
Total	50.60

So answer is a) $50.60