E8-30A Determine maximum outsourcing price (Learning Objective 6)lamilton Containers manufactures a variety of boxes used for packaging. Sales of itsModel A20 box have increased significantly to a total of 430,000 A20 boxes. Hamiltonhas enough existing production capacity to make all of the boxes it needs. The variablecost of making each A20 box is $0.80. By outsourcing the manufacture of these A20boxes, Hamilton can reduce its current fixed costs by $103,200. There is no alternativeuse for the factory space freed up through outsourcing, so it will just remain idle.What is the maximum Hamilton will pay per Model A20 box to outsource productionof this box?

Product outsourcing: product outsourcing means buying the product from an outside supplier Make or…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

E8-30A Determine maximum outsourcing price (Learning Objective 6)
lamilton Containers manufactures a variety of boxes used for packaging. Sales of its
Model A20 box have increased significantly to a total of 430,000 A20 boxes. Hamilton
has enough existing production capacity to make all of the boxes it needs. The variable
cost of making each A20 box is $0.80. By outsourcing the manufacture of these A20
boxes, Hamilton can reduce its current fixed costs by $103,200. There is no alternative
use for the factory space freed up through outsourcing, so it will just remain idle.
What is the maximum Hamilton will pay per Model A20 box to outsource production
of this box?

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