Answer the Following Questions Using the Information Below:
Casper's Engine

question 38

Multiple Choice

Answer the following questions using the information below:
Casper's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1000 units are as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 40000 \\\text { Direct labour } & 10000 \\\text { Variable overhead costs } & 30000 \\\text { Fixed overhead costs } & \underline{ 20000 }\\\quad \text { Total costs } & \underline{ \$ 100000} \\\end{array}$$ It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier.Casper's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit.
-The maximum price that Casper's Engine Company should be willing to pay the outside supplier is:

• A)$100 per TE456 part.
• B)$82 per TE456 part.
• C)$80 per TE456 part.
• D)$98 per TE456 part.

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Definitions:

Net Asset Value

The total value of a fund's assets minus its liabilities, often used in the context of mutual funds to determine each share's price.

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A corporation or trust engaged in the business of investing the pooled capital of investors in financial securities, such as stocks, bonds, and other assets.

Liabilities

Financial obligations or debts that a company owes to others, which must be paid back in the future.

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