10 Nov Clayton Corporation makes and sells skateboards. C
Clayton Corporation makes and sells skateboards. Clayton currently makes the 60,000 wheels used annually in its skateboards but has an opportunity to purchase the wheels from a reliable manufacturer. The costs of making the wheels follow: Annual Costs Associated with Manufacturing Skateboard Wheels Materials (60,000 units × $8) .$ 480,000 Labor (60,000 units × $4) 240,000 Depreciation on manufacturing equipment* 48,000 Salary of wheel production supervisor 130,000 Rental cost of equipment used to make wheels 110,000 Allocated portion of corporate-level facility-sustaining costs 66,000 Total cost to make 60,000 wheels $1,074,000 *The equipment has a book value of $74,000 but its market value is zero. Required a. Determine the maximum price per unit that Clayton would be willing to pay for the wheels. b. Would the price computed in Requirement a change if production were increased to 80,000 units? Support your answer with appropriate computations.
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