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Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 110,000 wheels annually are as follows:
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $14,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to antoher company for $37,700 per year
What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically indifferent between making or buying the wheels?
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