ABC Company makes 40,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part is shown below allocated fixed overhead 10.70 An outside supplier has offered to sell ABC Company 40,000 units of this part a year for $60.70 per unit. If ABC Company accepts this offer, the facilities now being used to make this part could be used to make more units of a product that is in high demand The additional contribution margin that could be earned on this other product would be $100,000 per year Calculate the selling price per unit charged by the outside supplier that would make ABC Company economically indifferent between making and buying the part. Enter your answer with two places after the decimal point (i.e., 578.90).
Explanation / Answer
ABC Company Make or Buy Decision Rule: Avoidable costs + Opportunity costs > Outside purchase price BUY Avoidable costs + Opportunity costs