he Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 150,000 wheels annually are: Direct materials $30,000 Direct labor $45,000 Variable manufacturing overhead $22,500 Fixed manufacturing overhead $63,000 An outside supplier has offered to sell Talbot similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $18,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $46,500 per year. Direct labor is a variable cost. At what purchase price for the wheels would Talbot be indifferent between making or buying the wheels? (Round your answer to 2 decimal places.)

$1.03

$1.07

$1.08

$0.77