Crigui Music produces 60,000 CDs on which to record music. The CDs have the following costs: $$\begin{array} { l r }
\text { Direct Materials } & \$ 13,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 3,000 \
\text { Fixed Overhead } & 7,000
\end{array}$$ Crigui could avoid $4,000 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 60,000 units externally, what is the maximum external price that Crigui would expect to pay for the units?
A)$34,000
B)$31,000
C)$38,000
D)$35,000

Question

Crigui Music produces 60,000 CDs on which to record music. The CDs have the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 13,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 3,000 \
\text { Fixed Overhead } & 7,000
\end{array}$$ Crigui could avoid $4,000 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 60,000 units externally, what is the maximum external price that Crigui would expect to pay for the units?
A)$34,000
B)$31,000
C)$38,000
D)$35,000

Quizplus · Accepted Answer

The Answer of Crigui Music produces 60,000 CDs on which to record music. The CDs have the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 13,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 3,000 \
\text { Fixed Overhead } & 7,000
\end{array}$$ Crigui could avoid $4,000 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 60,000 units externally, what is the maximum external price that Crigui would expect to pay for the units?
A)$34,000
B)$31,000
C)$38,000
D)$35,000

Crigui Music Produces 60,000 CDs on Which to Record Music