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Coronado Music produces 60000 CDs on which to record music. The CDs have the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $17500 20000 4000 7000 Coronado could avoid $4000 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 60000 units externally, what is the maximum amount that Coronado should pay to purchase the units? a. $41500 b. $48500 C. $44500 d. $45500

Coronado Music produces 60000 CDs on which to record music. The CDs have the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $17500 20000 4000 7000 Coronado could avoid $4000 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 60000 units externally, what is the maximum amount that Coronado should pay to purchase the units? a. $41500 b. $48500 C. $44500 d. $45500

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Coronado Music produces 60000 CDs on which to record music. The CDs have the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $17500 20000 4000 7000 Coronado could avoid $4000 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 60000 units externally, what is the maximum amount that Coronado should pay to purchase the units? a. $41500 b. $48500 C. $44500 d. $45500
Transcribed Image Text:Coronado Music produces 60000 CDs on which to record music. The CDs have the following costs: Direct Materials Direct Labor Variable Overhead Fixed Overhead $17500 20000 4000 7000 Coronado could avoid $4000 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 60000 units externally, what is the maximum amount that Coronado should pay to purchase the units? a. $41500 b. $48500 C. $44500 d. $45500
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