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What is the maximum per unit price

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Question - Lewis Auto Company manufactures a part for use in its production of automobiles. When 1,000 items are produced, the costs per unit are:

Direct Materials $12

Direct manufacturing Labor 60

Variable manufacturing Overhead 24

Fixed Manufacturing Overhead 32

Total $128

Monty Company has offered to sell Lewis Auto Company 1,000 units of the part for $120 per unit. The plant facilities could be used to manufacture another part at a savings of $22,000 if Lewis auto accepts the supplier's offer. In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated.

a. Using a Make versus Buy analysis, what alternative is best for Lewis Auto Company? clearly indicate whether the firm should Make or Buy the part. By how much better off will the firm be using your decision?

b. Given the information for Lewis Auto Company above, what is the maximum per unit price that Lewis should be willing to pay for these parts?

Reference no: EM132846957

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