1. NEON PHARMACEUTICALS
Neon Pharmaceuticals is a research-based company which manufactures a wide variety of drugs for use in hospitals. The purchasing manager has recently been approached by a new manufacturer based in a newly industrialised country who has offered to produce three of the drugs at their factory. The following cost and price information has been provided.
Drug Fairyoxide Spriteolite Goblinex
Production (units) 20,000 40,000 80,000
$ $ $
Direct material cost, per unit 0.80 1.00 0.40
Direct labour cost, per unit 1.60 1.80 0.80
Direct expense cost, per unit 0.40 0.60 0.20
Fixed cost per unit 0.80 1.00 0.40
Selling price each 4.00 5.00 2.00
Imported price 2.75 4.20 2.00
I. What saving/(increased cost) per unit would be made/(incurred) if Fairyoxide was purchased from the overseas producer (to two decimal places)?