The Bogart Company Produces 5,000 Units of Item SLM 46

question 104

Multiple Choice

The Bogart Company produces 5,000 units of item SLM 46 annually at a total cost of $200,000.
$$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 20,000 \\\hline \text { Direct labor } & 55,000 \\\hline \text { Variable overhead } & 45,000 \\\hline \text { Fixed overhead } & 80,000 \\\hline \text { Total } & \$ 200,000 \\\hline\end{array}$$
The Conner Company has offered to supply all 5,000 units of SLM 46 per year for $35 per unit.If Bogart accepts the offer,$8 per unit of the fixed overhead would be saved.In addition,some of Bogart's leased facilities could be vacated,reducing lease payments by $30,000 per year.At what price would Bogart be indifferent to Conner's offer?

• A) $40.
• B) $38.
• C) $35.
• D) $24.

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