Harvey Automobiles Uses a Standard Part in the Manufacture of Several

Multiple Choice

Harvey Automobiles uses a standard part in the manufacture of several of its trucks. The cost of producing 50,000 parts is $170,000, which includes fixed costs of $80,000 and variable costs of $90,000. By outsourcing the part, the company can avoid 30% of the fixed costs. If Harvey Automobiles buys the part, what is the most Harvey Automobiles can spend per unit so that operating income equals the operating income from making the part?

A) $3.40
B) $2.92
C) $3.88
D) $1.60