Answer:
$40,000
Explanation:
Current Cost = Direct Materials + Direct Labor + Variable Overhead + Fixed Overhead
= $20,000 + $9,000 + $3,000 + $7,000
= $39,000
Given,
Increase in profit contribution = $8,000 (If acquired from outside )
No fixed cost overhead Costs Can be reduced, so only profit margin will be reduced
New contribution margin = Increase in profit contribution (-) Fixed Cost
= $8,000 (-) $7,000
= $1,000
Maximum external price that Ruth Company would be willing to accept to acquire the 1,000 units externally
= Current Cost + New contribution margin
= $39,000 + $1,000
= $40,000
Maximum external price = $40,000
