Question

Seven Seas Boat Company manufactures 100 luxury yachts per month. A security system is included in each yacht. Seven Seas Boat Company manufactures the security system​ in-house. The company is considering the possibility of outsourcing the production of the security system in order to close down some of its facilities and reduce administrative costs. At​ present, the variable cost per unit is​ $300, and fixed costs are​ $38,000 per month. Assuming the company outsources the production of the security system and the fixed costs could be eliminated​ entirely, at what contract cost would outsourcing pay off for Seven​ Seas? (Round to the nearest whole​ dollar.)

Answer 1

Answer:

The maximum price is $680

Explanation:

Giving the following information:

At​ present, the variable cost per unit is​ $300, and fixed costs are​ $38,000 per month. Assuming the company outsources the production of the security system and the fixed costs could be eliminated​.

Seven Seas Boat Company manufactures 100 luxury yachts per month.

Make in house:

Total unitary cost= 300 + 38,000/100= $680

The maximum price is $680