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7. Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year. The company's unit costs at
7. Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year. The company's unit costs at this level of activity are given below: One of the materials used in the production of Zets is obtained from a foreign supplier. Civil unrest in the supplier's country has caused a cutoff in material shipments that is expected to last for three months. Barker Company has enough material on hand to operate at 40% of normal levels for the three-month period. As an alternative, the company could close the plant down entirely for the three months. Closing the plant would reduce fixed manufacturing overhead costs by 30% during the threemonth period and fixed selling expenses would continue at two-thirds of their normal level. What is the selling price per unit of Zet that would make the company indifferent between (i) closing the plant and (ii) not closing the plant for the three-month period? A. $35.50 B. $43.50 C. $24.00 D. $31.50 E. None of the above
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