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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 of the part are as follows: direct materials $115, direct labor $35, variable overhead $33, and fixed overhead $120. Producing one unit of the part in-house requires 5 hours of machine time. If Acme buys the part from an outside supplier, Acme will avoid 35% of the fixed overhead costs and Acme can use the freed-up machine time to manufacture another product that requires 10 hours of machine time per unit to produce and has a contribution margin of $220 per unit. What is the maximum per-unit purchase price that Acme can pay the outside supplier and break even on this outsourcing decision? O $238 O $280 O $293 O $335 O None of the above
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