Company is negotiating with potential supplier

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Reference no: EM132285295

A company is negotiating with a potential supplier for the purchase of 10,000 widgets. The company estimates that the supplier’s variable costs are $5.00 per unit and that the fixed costs, depreciation, overhead, etc. are $5,000. The supplier quotes a price of $10 per unit. Calculate the estimated average cost per unit. Do you think $10 is too much to pay? Could the purchasing department negotiate a better price?

Remember you need to add the variable cost to the fixed cost of each unit. You can figure out the fixed cost by spreading evenly the overall fixed cost on the number of widgets.

Reference no: EM132285295

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