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Perk Inc. manufactures lawn mowers. Perk is considering whether to continue to make the motors it uses in its mowers or to buy motors from
Perk Inc. manufactures lawn mowers. Perk is considering whether to continue to make the motors it uses in its mowers or to buy motors from an outside supplier. At the budgeted level of annual production of 1,000 units, Perk's per-unit costs of manufacturing motors in-house are as follows: Perk will avoid 35% of its fixed manufacturing overhead costs if it buys the motors from an outside supplier. In addition, producing a motor in-house requires 5 hours of machine time, which is a constrained resource. If Perk buys the motors, this machine time would be freed up to produce more units of another product that requires 10 hours of machine time per unit and has a contribution margin of $110 per unit. At what per-unit purchase price is Perk neither better off nor worse off if it buys the motors from an outside supplier rather than makes the motors in-house? $183 $225 $238 $280 None of the above
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