The Zulu Company has a maximum production capacity of 40,000 units per year. For that capacity level, fixed costs are $300,000 per year. Variable costs per unit are $50. In the coming year, the company has orders for 44,000 units at $85. The company wants to make a minimum overall operating income of $170,000 on these 44,000 units.
Determine the maximum additional costs to purchase 4,000 units from a subcontractor that Zulu Company would pay in order to earn an operating income of $170,000.
