A factory's entire machine capacity is used to produce essential components.The costs of using the machines are as follows.
V.C $15,000
F.C $50,000
Total $65,000
If all the components are purchased from an outside supplier,the machines could be used to produce other items which would earn a total contribution of $25,000. What is the maximum price that a profit-maximising company should be willing to pay to the outside supplier for the components?
A $15,000
B $25,000
C $40,000
D $65,000
Sir can you explain me how to get the answer
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Hi Tabeetha
Thanks for your post & welcome to Open Tuition CIMA forum.
Im presuming you have an answer in the textbook for this question? Please can you share it & let me know which part you dont understand - this is easier than you posing the question blind and expecting me to answer it for you?
Is this a CIMA question - I dont recognise it from one of the major publishers if so?
Many Thanks
Cath
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