Foto Company makes 50,000 units per year of a part it uses in the products it manufactures. The cost per unit of this part is shown below: Direct materials Direct labor Variable overhead $13 $10.10 $6.50 Allocated fixed overhead $8.60 Total $38.20 An outside supplier has offered to sell Foto Company 50,000 of these parts for $31.60 per unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin earned on this other product would be $120,000 per year. Calculate the selling price per unit charged by the outside supplier that would make Foto economically indifferent between making and buying the part.
Foto Company makes 50,000 units per year of a part it uses in the products it manufactures. The cost per unit of this part is shown below: Direct materials Direct labor Variable overhead $13 $10.10 $6.50 Allocated fixed overhead $8.60 Total $38.20 An outside supplier has offered to sell Foto Company 50,000 of these parts for $31.60 per unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin earned on this other product would be $120,000 per year. Calculate the selling price per unit charged by the outside supplier that would make Foto economically indifferent between making and buying the part.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Foto Company makes 50,000 units per year of a part it uses in the products
it manufactures. The cost per unit of this part is shown below:
Direct materials
Direct labor
Variable overhead
$13
$10.10
$6.50
Allocated fixed overhead $8.60
Total
$38.20
An outside supplier has offered to sell Foto Company 50,000 of these parts
for $31.60 per unit. If the company accepts this offer, the facilities now
being used to make the part could be used to make more units of a
product that is in high demand. The additional contribution margin earned
on this other product would be $120,000 per year.
Calculate the selling price per unit charged by the outside supplier that
would make Foto economically indifferent between making and buying the
part.
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