7T-10

Edward currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $25.50. Edward currently produces 16,000 subcomponents at the following manufacturing costs: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit cost Per unit $10.90 8.40 4.70 2.70 $26.70 a. If Edward has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier? b. If Edward has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier? (Round your answer to 2 decimal places.) Maximum Price per unit c. Now assume Edward would avoid $118,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier