The Hayes Company Manufactures and Sells Several Products,one of Which

question 89

Essay

The Hayes Company manufactures and sells several products,one of which is called a slip differential.The company normally sells 30,000 units of the slip differential each month.At this activity level,unit costs are: An outside supplier has offered to produce the slip differentials for the Hayes Company,and to ship them directly to the Hayes Company's customers.This arrangement would permit the Hayes Company to reduce its variable selling expenses by one third (due to elimination of freight costs).The facilities now being used to produce the slip differentials would be idle and fixed manufacturing overhead would continue at 60 percent of its present level.The total fixed selling expenses of the company would be unaffected by this decision.
Required:
What is the maximum acceptable price quotation for the slip differentials from the outside supplier?

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Definitions:

ROM Exercises

Short for Range of Motion exercises, these are specific movements designed to maintain or increase the flexibility and mobility of joints.

Quad Cane

A mobility aid with a four-footed base, providing greater stability than a standard cane for people who are partially disabled or need additional support when walking.

Hemiparesis

Weakness on one side of the body, often a result of stroke or brain injury.

Ambulation

The act of walking or moving from one place to another using one's feet.