What is the maximum amount company should be willing to pay

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Reference no: EM132802552

Problem - Regis Company makes the plugs it uses in one of its products at a cost of P36 per unit. This cost includes P8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell them to Regis at P33 per unit. If Regis decides to purchase the plugs, P60,000 of the annual fixed overhead will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. What is the maximum amount the company should be willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 50,000 units required each year?

Reference no: EM132802552

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