Reference no: EM132951308

Genesky Company is currently manufacturing Part ABS-43, producing 55,000 units annually. The part is used in the production of several products made by Genesky. The cost per unit for ABS-43 is as follows:

Direct materials - $45.60;

Direct labor - $9.80;

Variable overhead - $2.75;

Fixed overhead - $3.90;

Total - $62.05.

Of the total fixed overhead assigned to ABS-43, $15,400 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Whener for $58. There is no alternative use for the facilities currently used to produce the part. No significant non-unit based overhead costs are incurred.

Problem 1: What is the maximum amount per unit that Genesky would be willing to pay to an outside supplier?