Introduction to Materials Management 8th Edition by Steve Chapman ,Tony Arnold ,Ann Gatewood ,Lloyd Clive

Exercise 3

A company is negotiating with a potential supplier for the purchase of 100,000 widgets. The company estimates that the supplier's variable costs are $5 per unit and that the fixed costs, depreciation, overhead, and so on, are $50,000. The supplier quotes a price of $10 per unit. Calculate the estimated average cost per unit. Do you think $10 is too much to pay? Could the purchasing department negotiate a better price? How?