Question
Manor, Inc. currently manufactures 1,000 subcomponents per month in one of its factories. The unit costs to produce the subcomponents are: The unit costs to
Manor, Inc. currently manufactures 1,000 subcomponents per month in one of its factories. The unit costs to produce the subcomponents are:
The unit costs to produce are:
Per Unit
Direct Materials $50
Direct Labor $150
Variable Manufacturing Overhead $75
Fixed Manufacturing Overhead $100
Total $375
Manor is considering purchasing the subcomponents from an outside supplier, who normally charges $300 per unit. The supplier also has an "Exclusive Buyer's Club" which costs $30,000 per month to join, but whose members can purchase the subcomponents for $250 per unit. Fixed overhead is not avoidable. How many units would Manor need to order per month to make it worth it to join the "Exclusive Buyer's Club"?
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