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Curtin University Operations And Supply Chain Management Assignment Help - Ruth Company


Question - Ruth Company produces 1,000 units of a necessary component with the following costs:
Direct Materials $24,000
Direct Labor 16,000
Variable Overhead 4,000
Fixed Overhead 7,000

None of Ruth Company's fixed overhead costs can be reduced, but another product could be made
that would increase profit contribution by $8,000 if the components were acquired externally. If cost
minimization is the major consideration and the company would prefer to buy the components, what is
the maximum external price that Ruth Company would be willing to accept to acquire the 1,000 units
externally?

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