Max Payne is CEO of Payne Publishing, which publishes accounting and other business textbooks. An outside supplier, J. Baker, has approached Payne Publishing, offering to print and bind the texts for $24 per textbook. Baker is ISO 9000 certified, and its printing and binding will be of equally high quality as Payne’s own work. Payne is considering whether to accept Baker’s offer, since it is below Payne’s average cost per book (computed based on producing 25,000 textbooks per year): Direct materials: $11.00 Direct labor: $8.00 Variable MOH: $1.00 Fixed MOH: $7.20 Total cost/unit: $27.20 Payne needs 25,000 copies of the textbook per year. If he outsources the printing and binding, he can eliminate the $60,000 of fixed salary of the production supervisor. If Payne outsources the printing and binding, it will rent out its plant for $20,000 per year. What is the highest price per textbook Payne should be willing to pay Baker to do the printing and binding? IMPORTANT: Present your answer without a dollar sign and rounded to two decimal places. For example 15.25
Max Payne is CEO of Payne Publishing, which publishes accounting and other business textbooks. An outside supplier, J. Baker, has approached Payne Publishing, offering to print and bind the texts for $24 per textbook. Baker is ISO 9000 certified, and its printing and binding will be of equally high quality as Payne’s own work. Payne is considering whether to accept Baker’s offer, since it is below Payne’s average cost per book (computed based on producing 25,000 textbooks per year):
Direct materials: $11.00
Direct labor: $8.00
Variable MOH: $1.00
Fixed MOH: $7.20
Total cost/unit: $27.20
Payne needs 25,000 copies of the textbook per year. If he outsources the printing and binding, he can eliminate the $60,000 of fixed salary of the production supervisor. If Payne outsources the printing and binding, it will rent out its plant for $20,000 per year. What is the highest price per textbook Payne should be willing to pay Baker to do the printing and binding?
IMPORTANT: Present your answer without a dollar sign and rounded to two decimal places. For example 15.25
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