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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