Harvey Automobiles Uses a Standard Part in the Manufacture of Several

question 4

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 50,000 parts is $170,000, which includes fixed costs of $80,000 and variable costs of $90,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If Harvey Automobiles buys the part, what is the most Harvey Automobiles can spend per unit so that operating income equals the operating income from making the part?

• A)$3.40
• B)$2.92
• C)$3.88
• D)$1.60

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Definitions:

Mean IQ Score

The average score derived from standardized tests designed to measure human intelligence.

Flynn Effect

The observed substantial and long-term increase in intelligence test scores, measured in many parts of the world from roughly 1930 to the present day.

Heterosis

The phenomenon by which the offspring of genetically diverse parents exhibit qualities or performances superior to either parent.

Genetic Explanation

The rationale for the physical and behavioral characteristics of organisms, including humans, as influenced by the genes inherited from their parents.