Answer:
$2.07 per unit
Explanation:
Currently 45,000 units produced
total cost= $72,000 (variable) + $70,000 (fixed) = $142,000
average total cost per unit = $142,000 / 45,000 units = $3.16 per unit
if the company outsources the production of the part:
total cost = $72,000 + ($70,000 x 30%) = $72,000 + $21,000 = $93,000
average total cost per unit = $93,000 / 45,000 units = $2.07 per unit
if Blue Ridge spends more than $2.07 per unit, it will be spending more money by outsourcing the part than by producing it.
e.g. $2.10 per unit
total costs = ($2.10 x 45,000) + ($70,000 x 70%) = $94,500 + $49,000 = $143,500 which is higher than $142,000.
