Elly Industries is a multi-product company that currently manufactures 30,000 units of part MR24 each month for use in production of its products. The facilities now being used to produce part MR24 have a fixed monthly cost of $150,000 and a capacity to produce 35,000 units per month. If Elly were to buy part MR24 from an outside supplier, the facilities would be idle, but its fixed costs would continue at 40% of their present amount. The variable production costs of Part MR24 are $11 per unit.
-If Elly Industries continues to use 30,000 units of part MR24 each month,it would realize a financial advantage by purchasing this part from an outside supplier only if the supplier's unit price is less than:
A) $14 per unit
B) $11 per unit
C) $16 per unit
D) $13 per unit

Question

Quizplus · Accepted Answer

11ea7761_160c_9e7b_81a5_ed56c2f4bbb2_TB2580_00 The price from the outside supplier would have to be less than $420,000 ÷ 30,000 units = $14 per unit.

Elly Industries Is a Multi-Product Company That Currently Manufactures 30,000