Question
Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,100 units are as follows: Direct materials $42,000
Genent's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,100 units are as follows:
Direct materials $42,000
Direct labor 7,500
Variable overhead costs 29,500
Fixed overhead costs 21,000
Total costs $100,000
It is estimated that 9% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Genent's Engine Company has the option of purchasing the part from an outside supplier at $95.75 per unit.
The maximum price that Genent's Engine Company should be willing to pay the outside supplier is ________.
A. $92.63 per TE456 part
B. 473.54 per TE456 part
C. $91 per TE456 part
D. $72 per TE456 part
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