The

Anderson

Company has a maximum production capacity of

45,000

units per year. For that capacity level, fixed costs are

$350,000

per year. Variable costs per unit are

$40.

In the coming year, the company has orders for

50,000

units at

$60.

The company wants to make a minimum overall operating income of

$195,000

on these

50,000

units.

Requirement

What maximum unit purchase price would

Anderson

Company be willing to pay to a subcontractor for the additional

5,000

units it cannot manufacture itself to earn an operating income of

$195,000?

Determine the maxiumum total cost to

Anderson

Company of producing the

50,000

units while earning an operating income of

$195,000.

Total costs to produce 50,000 units is