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As a result of increased sales, ExoMusic needs 360,000 jewel-case liners rather than 210,000 ....

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Accounting

image As a result of increased sales, ExoMusic needs 360,000 jewel-case liners rather than 210,000 . ExoMusic has enough existing capacity to make all of the liners it needs. In addition, due to volume discounts, its variable costs of making each liner will decline to $0.26 per liner. Assume that by outsourcing, ExoMusic can reduce its current fixed costs ( $42,000 ) by $11,000. There is no alternative use for the factory space freed through outsourcing, so it will just remain idle. What is the maximum ExoMusic will pay to outsource production of its CD liners? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit

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