CDE Company produces 1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor 15,000 Variable Overhead 8,000 Fixed Overhead 10,000 CDE's Company could avoid $6,000 in fixed overhead costs if it acquires the components externally. If cost minimization is a 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 1,000 units externally? A. $57,000 B. $59,000 C. $61,000 D. $63,000

CDE Company produces 1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor 15,000 Variable Overhead 8,000 Fixed Overhead 10,000 CDE's Company could avoid $6,000 in fixed overhead costs if it acquires the components externally. If cost minimization is a 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 1,000 units externally? A. $57,000 B. $59,000 C. $61,000 D. $63,000

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 17E: Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside...

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Materials used by the Instrument Division of Ziegler Inc. are currently purchased from outside suppliers at a cost of 1,350 per unit. However, the same materials are available from the Components Division. The Components Division has unused capacity and can produce the materials needed by the Instrument Division at a variable cost of 900 per unit. a. If a transfer price of 1,000 per unit is established and 75,000 units of materials are transferred, with no reduction in the Components Divisions current sales, how much would Ziegler Inc.s total operating income increase? b. How much would the Instrument Divisions operating income increase? c. How much would the Components Divisions operating income increase?
Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has approached Oat Treats with a proposal to sell the company its top selling oat cereal bar at a price of $27,500 for 20,000 bars. The costs shown are associated with production of 20,000 oat bars currently. The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Oat Treats make or buy the oat bars?
Red Company produces 1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor 15,000 Variable Overhead 8,000 Fixed Overhead 10,000 Red's 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 Red Company would accept to acquire the 1,000 units externally? Select one: a. $59,000 b. $63,000 c. $61,000 d. $57,000
Nelly Technology manufactures a particular computer component. Currently, the costs per unit are asfollows:Direct material P 50Direct labor 500Variable overhead 250Fixed overhead 400Fur Inc. has obtained Nelly with a offer to sell 10,000 units of the component for P1,100 per unit. IfNelly accepts the proposal, P2,500,000 of the fixed overhead will be eliminated. Should Nelly makeor buy the component?
What are the fixed overhead costs of making the component?
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