Birdflu Company manufactures a part for its production cycle.The costs per unit for 38,000 units of this part are as follows: $\begin{array} {ll}
\text {Direct materials}&\$3\
\text {Directlabor}&5\
\text {Variable factory overhead}&4\
\text {Fixed factory overhead}&6\
\text {Total costs}&\$16\
\end{array}$ The fixed factory overhead costs are unavoidable.Assuming no other use of their facilities, the highest price that Birdflu Company should be willing to pay for the part is _____.
A)$12
B)$16
C)$8
D)$11

Question

Quizplus · Accepted Answer

The highest price Birdflu Company should be willing to pay is the sum of the avoidable costs: direct materials, direct labor, and variable factory overhead, which total $12.

Birdflu Company Manufactures a Part for Its Production Cycle The Fixed Factory Overhead Costs Are Unavoidable