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Company X manufactures and sells a single product A. The following information i...

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Company X manufactures and sells a single product A. The following information is available:

  • Direct materials $ 1,22
  • Direct labour (variable) $ 5,91
  • Variable manufacturing overhead $ 5,89
  • Variable marketing cost $ 4,47
  • Fixed manufacturing cost $ 2.18

  • Fixed marketing cost $ 2.32

Company X can outsource product A from an external company, at the same quality. In this scenario, the marketing fixed costs will remain unchanged, however if product A is outsourced there will be a reduction of 30% in the variable marketing costs. The fixed manufacturing costs refer to the manufacturing facilities that will be idle if product A is outsourced.

What is the maximum price that Company X is willing to pay for Product A without damaging the company's operating income?

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