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Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing...

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Question

Accounting

Climate-Control, Inc., manufactures a variety of heating and air-conditioning units. The company is currently manufacturing all of its own component parts. An outside supplier has offered to sell a thermostat to Climate-Control. To evaluate this offer, Climate-Control, Inc., has gathered the following information relating to its own cost of producing the thermostat internally:

Per Unit

15,000 Units

per Year

Direct materials. . ..

Direct labor

Variable manufacturing overhead .

Fixed manufacturing overhead, traceable .

Fixed manufacturing overhead, common, but allocated

Total cost ...

$ 6

8

1

2*

10

$ 27

$ 90,000

120,000

15,000

30,000

150,000

$405,000

*Supervisor salaries that could be avoided

Assume the company has no alternative use for the facilities now being used to produce the thermostat. What is the maximum price at which Climate-Control would be indifferent between buying and making the thermostat?

Group of answer choices

$15

$17

$22

$14

$20

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