Davidson Company Produces a Part That Is Used in the Manufacture

question 86

Multiple Choice

Davidson Company produces a part that is used in the manufacture of one of its products.The costs associated with the production of 5,000 units of this part are as follows:
$\begin{array}{ll}\text { Direct materials } & \$ 108,000 \\\text { Direct labor } & 156,000 \\\text { Variable factory overhead } & 70,000 \\\text { Fixed factory overhead } & \underline{168,000} \\\text { Total costs }&\$502,000\end{array}$
Of the fixed factory overhead costs,$72,000 are avoidable.Assuming there is no other use for the facilities.What is the highest price Davidson Company should be willing to pay for 5,000 units of the part?

• A) $264,000
• B) $334,000
• C) $406,000
• D) $502,000

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