Managerial Accounting

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Coats Inc. Maximum Price: For a Make or Buy Decision


Coats Inc. produces a part that is used in the manufacture of one of its products. The costs associated with the production of 75,000 units of this part are as follows:

Manufacturing costs of 75,000 parts:
Direct Materials \$500,000
Direct Labor \$250,000
Variable Manufacturing Overhead \$500,000
Fixed Manufacturing Overhead \$750,000
Total cost \$2,000,000

Of the fixed manufacturing overhead, \$275,000 is the plant manager and shared equipment costs that would not be eliminated if they buy the part.

What is the maximum price per part they can pay for this part without losing profits?

Enter the part price per unit as a whole number, without dollars signs or commas.