Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 110,000 wheels annually are as follows:
- Direct material $22,000
- Direct labor $33,000
- Variable manufacturing overhead $16,500
- Fixed manufacturing overhead $59,000
- total $130,500
An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $14,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to antoher company for $37,700 per year
What is the highest price that Talboe could pay the outside supplier for each wheel and still be economically indifferent between making or buying the wheels?