(Management Accounting) Davidson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:...

(Management Accounting)

Davidson Company produces a part that is used in the manufacture of one of its products. The costs associated with the production of 5,000 units of this part are as follows:

Direct materials                                $108,000

Direct labor                                         156,000

Variable factory overhead                    70,000

Fixed factory overhead                       168,000

Total costs                                        $502,000

Of the fixed factory overhead costs, $72,000 are avoidable. Assuming there is no other use for the facilities. What is the highest price Davidson Company should be willing to pay for 5,000 units of the part?

1. A) $264,000


2. B) $334,000


3. C) $406,000


4. D) $502,000