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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 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: Number of parts produced annually 22,000 Fixed costs $ 40,000 Variable costs $ 66,000 Total cost to produce $ 106,000 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? a. $5.32 b. $3.50 c. $1.93 d. $1.00
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