Part P40 Is a Part Used in the Production of Air

question 245

Multiple Choice

Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation buys the part,what is the most Jackson Corporation can spend per unit so that operating income is equal to $97,000?

• A)$5.32
• B)$3.50
• C)$1.93
• D)$1.00

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Definitions:

Service Charge

A fee charged for a particular service provided by a company or institution.

Interest

The cost of borrowing money or the return on investment capital, often expressed as a percentage rate over a period of time.

Adjusted Cash Balance

The cash balance recorded in accounting books after considering outstanding checks and deposits in transit, ensuring it matches the actual bank balance.

Check Register

A record book or electronic log used to track checks written, deposits made, and current account balances.