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The Balearic Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 16,000 units of the
The Balearic Company manufactures and sells several products, one of which is called a slip differential. The company normally sells 16,000 units of the slip differential each month. At this activity level, unit costs are: Direct Materials Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling Expenses Fixed Selling Expenses $16.50 $28.00 $5.50 $11.00 $4.50 $ 3.00 The company is considering outsourcing production of the slip differential. In the event that it does so, the company will save 80% of the fixed manufacturing overhead and 40% of the variable selling expenses, but fixed selling expenses will remain unchanged. In addition, there is factory space that will be available to be sublet, generating revenues of $52,000 each month. What is the maximum price that Helion Company should pay per slip differential if it chooses to outsource production?
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