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.)

Question

Business

Killian Clarke

10 October, 03:39

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.)

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Answers (1)

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Gideon Warner · Answer 1

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