Donald's Engine Company manufactures part TE456 used in several of its engine models.

Monthly production costs for 1,000 units are as follows:

Direct materials $ 20,000

Direct labor 5,000

Variable overhead costs 15,000

Fixed overhead costs 10,000

Total costs $50,000

It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Donald's Engine Company has the option of purchasing the part from an outside supplier at $42.50 per unit.

The maximum price that Donald's Engine Company should be willing to pay the outside supplier

is:

A) $40 per TE456 part

B) $41 per TE456 part<------------- answer

C) $49 per TE456 part

D) $50 per TE456 part

Can someone help me with this question please? The answer key says the answer is B but I dont know how it got that? Show your work please and thanks in advance!