Part P40 Is a Part Used in the Production of Air

question 207

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 $4.50 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 $98,000?

• A)$3.77
• B)$2.98
• C)$2.19
• D)$1.52

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