An outside supplier has offered to sell the component for

Reference no: EM13576919

Bruce Industries manufactures 200,000 components per year. The manufacturing cost of the components was determined as follows:

Direct materials $200,000

Direct labor 320,000

Variable manufacturing overhead 120,000

Fixed manufacturing overhead 160,000

An outside supplier has offered to sell the component for $3.40. If Bruce purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $20,000.

Requirements:

-If Bruce purchases the component from the supplier in-stead of manufacturing it, the effect on income would be

-What is the maximum price Bruce would be willing to pay the outside supplier?

Reference no: EM13576919

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