Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 220,000 wheels annually are as follows: Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total $44,000 66,000 33,000 72,000 $215,000 An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $27,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $65,400 per year. What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically indifferent between making or buying the wheels? (Round your answer to 2 decimal places.)

Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 220,000 wheels annually are as follows: Direct material Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total $44,000 66,000 33,000 72,000 $215,000 An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $27,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $65,400 per year. What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically indifferent between making or buying the wheels? (Round your answer to 2 decimal places.)

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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