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Philo Fans manufactures the motors for the 10,000 ceiling fans it sells each month. The cost information for these motors is as follows: Direct


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Philo Fans manufactures the motors for the 10,000 ceiling fans it sells each month. The cost information for these motors is as follows: Direct Materials per unit $15.00 Direct Labor per unit 30.00 Manufacturing Overhead per unit $12.00 Total Manufacturing Costs per unit $57.00 The accounting department noted that 30% of the manufacturing overhead was fixed. Jenco Electronics has offered to sell Philco the 10,000 motors it needs each month for $60 per unit. If Philco accepted the offer 25% of the total dollars of fixed manufacturing overhead could be avoided. In addition, the newly available plant facilities could be used to produce bladeless (air multiplier) fans. The marketing department has provided the following estimates for this new fan type: Sales (units per month) 4,000 Sales Revenue per unit $75.00 Direct Materials per unit 5.00 Direct Labor per unit 45.00 Variable Overhead per unit 6.00 Question #9 - At what level of production would Philco be indifferent between making the motors itself or outsourcing them from Jenco? Calculate your answer to the nearest unit. (4 marks)

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