Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation buys the part,what is the most Jackson Corporation can spend per unit so that operating income is equal to $97,000?

Question

Part P40 is a part used in the production of air conditioners at Jackson Corporation.The following costs and data relate to the production of Part P40:

Jackson Corporation can purchase the part from an outside supplier for $4.25 per unit.If they purchase from the outside supplier,50% of the fixed costs would be avoided.If Jackson Corporation buys the part,what is the most Jackson Corporation can spend per unit so that operating income is equal to $97,000?

Quizplus · Accepted Answer

B)
Desired Income $97,000
Less Unavoidable Fixed Cost 50% × $40,000 20,000
Equals Maximum cost of part 77,000 / 22,000 units = $3.50

Part P40 Is a Part Used in the Production of Air