Part Z45 Is a Part Used in the Production of Blenders

question 66

Multiple Choice

Part Z45 is a part used in the production of blenders at Andrew Corporation.The following costs and data relate to the production of Part Z45: $$\begin{array} { | l | c r | } \hline \text { Number of parts produced annually } & & 20,000 \\\hline \text { Fixed costs } & \$ & 40,000 \\\hline \text { Variable costs } & \mathbf { \$ } & 66,000 \\\hline \text { Total cost to produce } & \$ & 106,000 \\\hline\end{array}$$ Andrew Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,40% of the fixed costs would be avoided.
-If Andrew Corporation buys the part,what is the most Andrew Corporation can spend per unit so that their operating income remains the same as it is currently?

• A)$5.70
• B)$1.50
• C)$1.65
• D)$4.10

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