Ruth Company produces 1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor 15,000 Variable Overhead 9,000 Fixed Overhead 10,000 Ruth 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 Ruth Company would accept to acquire the 1,000 units externally? A) $58,000 B) $62,000 C) $59,000 D) $64,000
Ruth Company produces 1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor 15,000 Variable Overhead 9,000 Fixed Overhead 10,000 Ruth 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 Ruth Company would accept to acquire the 1,000 units externally? A) $58,000 B) $62,000 C) $59,000 D) $64,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Ruth Company produces 1,000 units of a necessary component with the following
costs:
Direct Materials
$34,000
Direct Labor
15,000
Variable Overhead
9,000
Fixed Overhead
10,000
Ruth 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 Ruth Company would accept to acquire the 1,000 units externally?
A) $58,000
B) $62,000
C) $59,000
D) $64,000
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