Make or buy (continuation of 11-29). Assume that, as in requirement 7 of Problem 11-29, a proposal is received from an outside supplier who will make and ship high-style pens directly to the Class Company’s customers as sales orders are forwarded from Class’s sales staff. If the supplier’s offer is accepted, the present plant facilities will be used to make a new pen whose unit costs will be:

Total fixed manufacturing overhead will be unchanged from the original level given at the beginning of Problem 11-29. Fixed marketing costs for the new pens are over and above the fixed marketing costs incurred for marketing the high-style pens at the beginning of Problem 11-29. As in the previous problem, the variable marketing expenses will be reduced by 20%. The new pen will sell for $10.25. The minimum desired operating income on the two pens taken together is $75,000 per year. New pen sales will be 150,000 units.
REQUIRED What is the maximum purchase cost per unit that the Class Company would be willing to pay for subcontracting the production of the high-style pens?LO1

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Variable manufacturing costs $5.80 Fixed manufacturing costs $1.50 Variable marketing costs $1.80 Fixed marketing costs for the new pen $0.75