Striker 44 Corporation Produces a Part That Is Used in the Manufacture

question 68

Multiple Choice

Striker 44 Corporation produces a part that is used in the manufacture of one of its products.The costs associated with the production of 12,000 units of this part are as follows:

Of the fixed factory overhead costs,$58,000 is avoidable.
Assuming no other use of their facilities,the highest price that McMurphy should be willing to pay for 12,000 units of the part is ________.

• A)$408,000
• B)$273,000
• C)$331,000
• D)$351,000

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Definitions:

Normal Goods

Goods for which demand increases as the income of individuals increases, and vice versa.

Income Elasticity of Demand

An indicator of the responsiveness of the demand for a product to variations in consumer income.

Cross-Price Elasticity of Demand

A measure of how much the quantity demanded of one good responds to a change in the price of another good.

Quantity Purchased

The total amount of a good or service bought by consumers at a specific price level.