Grand Limited currently produces a component of a product with the following per unit production...
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Accounting
Grand Limited currently produces a component of a product with the following per unit production costs:
Direct materials
$18.93
Direct labour
32.35
Overhead
20.74
Total production costs
$72.02
Grand Ltd. currently manufactures these components in-house, averaging production of 29196 units each year. A supplier has approach the company offering to supply 29196 units each year at a cost of $53.12 each.
60% of the overhead is fixed and if Grand Ltd. purchases the components, then 1/3 of the fixed overhead costs would be avoidable.
What is the maximum price that Grand should pay per unit for the component?
Select one:
a. $72.02
b. $63.72
c. $58.19
d. $59.58
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