Question
Manor, Inc. currently manufactures 1,000 subcomponents per month in one of its factories. The unit costs to produce the subcomponents are: Per unit Direct materials
Manor, Inc. currently manufactures 1,000 subcomponents per month in one of its factories. The unit costs to produce the subcomponents are:
Per unit | |||
Direct materials | $ | 53 | |
Direct labor | 155 | ||
Variable manufacturing overhead | 80 | ||
Fixed manufacturing overhead | 107 | ||
Total unit cost | $ | 395 | |
Manor is considering purchasing the subcomponents from an outside supplier, who normally charges $313 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 $263 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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