Crane Music produces 59000 blank CDs on which to record music. The CDs have the following costs: Direct Materials $10000 Direct Labour 14000 Variable Overhead 2500 Fixed Overhead 6500 None of Crane’s fixed overhead costs can be reduced, but another product could be made that would increase the operating income by $3500 if the CDs were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Crane would be willing to accept to acquire the 59000 units externally? $33000 $30000 $29500 $36500
Crane Music produces 59000 blank CDs on which to record music. The CDs have the following costs: Direct Materials $10000 Direct Labour 14000 Variable Overhead 2500 Fixed Overhead 6500 None of Crane’s fixed overhead costs can be reduced, but another product could be made that would increase the operating income by $3500 if the CDs were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Crane would be willing to accept to acquire the 59000 units externally? $33000 $30000 $29500 $36500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Crane Music produces 59000 blank CDs on which to record music. The CDs have the following costs:
None of Crane’s fixed overhead costs can be reduced, but another product could be made that would increase the operating income by $3500 if the CDs were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Crane would be willing to accept to acquire the 59000 units externally?
| Direct Materials | $10000 |
| Direct Labour | 14000 |
| Variable |
2500 |
| Fixed Overhead | 6500 |
None of Crane’s fixed overhead costs can be reduced, but another product could be made that would increase the operating income by $3500 if the CDs were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Crane would be willing to accept to acquire the 59000 units externally?
$33000
$30000
$29500
$36500
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