Ahrends Corporation Makes 70,000 Units Per Year of a Part

question 144

Multiple Choice

Ahrends Corporation makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: An outside supplier has offered to sell the company all of these parts it needs for $48.50 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $273,000 per year.If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $8.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 70,000 units required each year? (Round your intermediate calculations to 2 decimal places.)

• A) $50.60 per unit
• B) $3.90 per unit
• C) $58.80 per unit
• D) $54.90 per unit

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Definitions:

Large Movements

Broad, impactful social, political, or cultural shifts that influence large populations or regions.

Fine Motor Skills

Fine motor skills involve the coordination of small muscles in movements—usually involving the synchronization of hands and fingers—with the eyes.

Small Body Movements

Minor physical actions or gestures, often involuntary, that can be indicative of underlying emotions or intentions.

Motor Skills

The abilities related to the movement and coordination of the body's muscles, including both fine motor skills (small movements, such as writing) and gross motor skills (larger movements, such as walking).