MB Ltd. manufactures electric toothbrushes. Each toothbrush requires a small motor which MB is currently manufacturing. RW Ltd. has offered to supply the motor for $11 per unit. MB's current manufacturing costs for each motor are $2.00 of direct material, $4.00 of direct labour, $3.00 of variable manufacturing overhead, and $1.50 fixed manufacturing overhead. If MB accepts RW's offer, all fixed manufacturing overhead costs will continue whether the motor is manufactured or purchased. Calculate the maximum price MB should be willing to pay.

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Answer To determine the maximum price MB Ltd should be willing to pay for the motor supplied by RW L... View the full answer