Calculate the selling price per unit charged

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Question - LPR Company makes 20,000 units per year of a component part that it uses in the products it manufactures. The unit cost of this component part is given below:

direct materials $26.24

direct labor $31.97

variable overhead $14.63

allocated fixed overhead $11.25

An outside supplier has offered to sell LPR Company 20,000 units of this part for $82.66 per unit.

If LPR 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 earned on this other product would be $69,000 per year.

Required - Calculate the selling price per unit charged by the outside supplier that would make LPR Company economically indifferent between making and buying the part.

Reference no: EM133091978

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