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Trey's Trucks uses a standard part in the manufacture of several of its trucks. The cost of producing 90,000 parts is $120,000, which includes fixed costs of $50,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If the company buys the part, what is the most it can spend per unit so that operating income equals the operating income from making the part? (Round the final answer to the nearest cent.) O A. $0.56 O B. $1.50 O C. $1.33 O D. $0.94

Trey's Trucks uses a standard part in the manufacture of several of its trucks. The cost of producing 90,000 parts is $120,000, which includes fixed costs of $50,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If the company buys the part, what is the most it can spend per unit so that operating income equals the operating income from making the part? (Round the final answer to the nearest cent.) O A. $0.56 O B. $1.50 O C. $1.33 O D. $0.94

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Trey's Trucks uses a standard part in the manufacture of several of its trucks. The cost of producing 90,000 parts is $120,000, which includes fixed costs of $50,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If the company buys the part, what is the most it can spend per unit so that operating income equals the operating income from making the part? (Round the final answer to the nearest cent.) O A. $0.56 O B. $1.50 O C. $1.33 O D. $0.94
Transcribed Image Text:Trey's Trucks uses a standard part in the manufacture of several of its trucks. The cost of producing 90,000 parts is $120,000, which includes fixed costs of $50,000 and variable costs of $70,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If the company buys the part, what is the most it can spend per unit so that operating income equals the operating income from making the part? (Round the final answer to the nearest cent.) O A. $0.56 O B. $1.50 O C. $1.33 O D. $0.94
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