Herman Containers manufactures a variety of boxes used for packaging. Sales of its Model A20...
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Herman Containers manufactures a variety of boxes used for packaging. Sales of its Model A box have increased significantly to a total of A boxes. Herman has enough existing production capacity to make all of the boxes it needs. The variable cost of making each A box is $ By outsourcing the manufacture of these A boxes, Herman can reduce its current fixed costs by $ There is no alternative use for the factory space freed up through outsourcing, so it will just remain idle. What is the maximum Herman will pay per Model A box to outsource production of this box? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. 
Herman Containers manufactures a variety of boxes used for packaging. Sales of its Model A box have increased significantly to a total of A boxes. Herman has enough existing production capacity to make all of the boxes it needs. The variable cost of making each A box is $ By outsourcing the manufacture of these A boxes, Herman can reduce its current fixed costs by $ There is no alternative use for the factory space freed up through outsourcing, so it will just remain idle.
What is the maximum Herman will pay per Model A box to outsource production of this box?
Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit.
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