Use the Information Below to Answer the Following Question(s)

question 174

Multiple Choice

Use the information below to answer the following question(s) :
Compact Appliances uses a standard part in the manufacture of several of its air conditioners. The cost of producing 40,000 parts is $110,000, which includes fixed costs of $50,000 and variable costs of $60,000. The company can buy the part from an outside supplier for $4.00 per unit, and avoid 40% of the fixed costs.
-If Compact Appliances buys the part, what is the most Compact Appliances can spend per unit so that operating income equals the operating income from making the part?

• A) $1.60
• B) $1.50
• C) $2.00
• D) $3.50

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Definitions:

Age

The length of time that a person or object has existed or the period since an object’s creation or a person’s birth.

Price

The amount of money required to purchase something or the value that is ascribed to a good or service.

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A compact car produced by the Ford Motor Company, popular in various editions from the 1960s through the early 2000s.

Grade Point Averages

A numerical calculation representing the average value of the accumulated final grades earned in courses over time.