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?
A) $264,000
B) $334,000
C) $406,000
D) $502,000

C