Establishing a price for an outsourcing decision Romero Corporation makes and sells skateboards. Romero currently makes the 60,000 wheels used annually in its skateboards but has an opportunity to purchase the wheels from a reliable manufacturer. The costs of making the wheels follow.

Required
a. Determine the maximum price per unit that Romero would be willing to pay for the wheels.
b. Would the price computed in Requirement a change if production were increased to 80,000 units? Support your answer with appropriate computations.

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Annual Costs Associated with Manufacturing Skateboard Wheels Materials (60,000 units x $5) Labor (60,000 units x 3) Depreciation on manufacturing equipment* Salary of wheel production supervisor Rental cost of equipment used to make wheels Allocated portion of corporate-level facility-sustaining costs Total cost to make 60,000 wheels $300,000 180,000 24,000 65,000 55,000 33,000 $657,000 "The equipment has a book value of $74,000 but its market value is zero.