Birdflu Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable

question 114

Multiple Choice

Birdflu Company manufactures a part for its production cycle.The costs per unit for 38,000 units of this part are as follows: $\begin{array} {ll}\text {Direct materials}&\$3\\\text {Directlabor}&5\\\text {Variable factory overhead}&4\\\text {Fixed factory overhead}&6\\\text {Total costs}&\$16\\\end{array}$ The fixed factory overhead costs are unavoidable.Assuming no other use of their facilities, the highest price that Birdflu Company should be willing to pay for the part is _____.

• A)$12
• B)$16
• C)$8
• D)$11

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Definitions:

Capital Investment

The purchase of goods or services by a firm to add to its fixed assets to increase its capacity or efficiency in producing goods or services.

Consumption

The use of goods and services by households, one of the major components of an economy’s gross domestic product, indicating economic health and consumer confidence.

Term of a Bond

The length of time until a bond's maturity date, when the principal amount of the bond is due to be paid to the bondholder.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, that lenders charge borrowers for the use of their funds.