Selling price per unit Costs per unit: Electric motor Other parts Direct labour ($15/hour) Manufacturing overhead Selling and administrative costs Profit per unit $ 6.00 $ 72.00 8.00 15.00 15.00 20.00 64.00 $ 8.00 Michael believes that in the coming year, demand for the retractable fans will be 20,000 units. Cool Sphere has looked into the possibility of purchasing the retractable fans from another manufacturer to help it meet this demand. Blowhard, a steady supplier of quality products, would be able to supply up to 9,000 retractable fans per year at a price of $46.00 per unit, delivered to Cool Sphere's facility. As you nodded your head, Michael continued: "As I have told Maureen, demand is going to go up to 20,000 units next year. But I only have capacity for 15,000 units. So what should I do? I know we can buy some from Blowhard to make up the 20,000 units requirement, but how many should I buy? Blowhard has said they can supply me with up to 9,000 units. If the price they are quoting me is lower than how much it cost me to produce, then maybe I should just buy from Blowhard and then produce the remainder. Tell me how many I need to buy. Give me a plan of how many to make and how many to buy and show me what is the maximum contribution margin I can make." "Look," Michael said to you. "I need you to work out for me what these all mean. My accounts team knows how to put in the numbers, but it seems like no one knows what to do with it. Is that how much it really costs me to produce a fan? If so, then Blowhard must be doing something different to be able to charge me such a low price. Can you re-work those numbers and tell me how much each of the Retractafans cost?" 4 Find the price diff between buying and produce