Ruth Company Produces 1,000 Units of a Necessary Component with the Following

question 92

Multiple Choice

Ruth Company produces 1,000 units of a necessary component with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 34,000 \\\text { Direct Labor } & 15,000 \\\text { Variable Overhead } & 9,000 \\\text { Fixed Overhead } & 10,000\end{array}$$ Ruth Company could avoid $6,000 in fixed overhead costs if it acquires the components externally.If cost minimization is the major consideration and the company would prefer to buy the components, what is the maximum external price that Ruth Company would accept to acquire the 1,000 units externally?

• A)$58,000
• B)$64,000
• C)$59,000
• D)$62,000

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Definitions:

Shipping Costs

Expenses associated with the transportation of goods from the seller to the buyer, which can include packaging, postage, and handling fees.

Purchase Order

A formal document sent by a buyer to a seller with details about a purchase, including quantities and prices of products.

Purchase Contract

A purchase contract is a legal agreement between a buyer and seller detailing the terms and conditions under which a product or property is sold.

Legal Offer

A proposal by one party to another intended to create a legally binding agreement upon acceptance.