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Acme Company plans to outsource production of a component part that it currently produces in-house. At the budgeted annual production level of 1,000 units,
Acme Company plans to outsource production of a component part that it currently produces in-house. At the budgeted annual production level of 1,000 units, Acme's per- unit manufacturing costs for the part are as follows: direct materials $105, direct labor $65, variable overhead $23, and fixed overhead $50. Producing one unit of the part in- house requires 4 hours of machine time. If Acme buys the part from an outside supplier, Acme will avoid 30% of the fixed overhead costs and Acme can use the freed-up machine time to manufacture another product that requires 8 hours of machine time per unit to produce and has a contribution margin of $430 per unit. What is the maximum per-unit purchase price that Acme can pay the outside supplier and break even on this outsourcing decision? $443
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