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

question 107

Multiple Choice

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

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Definitions:

Service Stockout

Occurs when a service provider cannot meet customer demand due to insufficient resources or capacity, leading to customer dissatisfaction.

Service Level

A measure of the quality of a company's service, typically in terms of meeting customer needs or the percentage of customer demands met on time.

Probability

An evaluation of the probability that a specific event will take place.

Stockout

A situation in retail or supply chain management where the inventory of a particular item is completely depleted, leading to an inability to meet customer demand.