Red Company Produces 1000 Units of a Necessary Component with the Following

question 203

Multiple Choice

Red Company produces 1000 units of a necessary component with the following costs: $$\begin{array} { l r } \text { Direct Materials } & \$ 34,000 \\\text { Direct Labor } & 15,000 \\\text { Variable Overhead } & 8,000 \\\text { Fixed Overhead } & 10,000\end{array}$$ Red's Company could avoid $6000 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 Red Company would accept to acquire the 1000 units externally?

• A) $57000
• B) $61000
• C) $59000
• D) $63000

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Definitions:

Customer Level Cost

Customer Level Cost refers to expenses directly associated with serving a specific customer, including support, communication, and delivery costs.

E-Commerce

The buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet.

Business Processes

A set of interconnected activities and tasks that, once completed, achieve a specific organizational goal.

Accounting Systems

The methods and records used to track and report an organization's financial transactions and statuses.