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Gama company has a single product called a Xet. The company normally produces and sells 80,000 Xet's each year. The company unit costs are given

Gama company has a single product called a Xet. The company normally produces and sells 80,000 Xet's each year. The company unit costs are given below:

DM $9.50

DL $10

Variable OH $2.80

Fixed OH $5.00 ($400,000 total)

Variable Selling expenses $1.70

Fixed Selling expenses $4.50 ($360,000 total)

Total cost per unit $33.50

One of the materials in the production of Xets is obtained from a foreign supplier. Civil unrest has caused a cutoff in material shipments that is expected to last for 3 months. Gama Company has enough materials to operate at 40% of normal operating levels for the 3 month period. As an alternative the company can close down the plant for the three months. Closing the plant would reduce fixed manufacturing overhead by 30% during the 3 months and fixed selling expenses would continue at 2/3 their normal operating level. What is the selling price per unit of Xet that would make the company indifferent between closing the plant and not closing the plant for the 3 month period?

A. $31.50

B. $43.50

C. $24.00

D. $35.50

Please show all work.

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