Pneu Shoe Company manufactures various types of athletic shoes. Several types require a gel insole....
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Pneu Shoe Company manufactures various types of athletic shoes. Several types require a gel insole. Presently, the company makes all gel insoles it requires. However, management is evaluating an offer from Ram Air Co. to provide gel insoles at a cost of $3.60 each. Pneu Shoe's management has estimated that the variable production costs of the insole total $2.70 per unit and that the company could avoid $27,000 per year in fixed costs if it purchased rather than produced the insoles.
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