Swifty produces 1,000 units of necessary components with the following costs: Direct material - $30,000 Direct Labor - $19,000 Variable Overhead - $3,000 Fixed Overhead - $7,000. The Fixed Overhead costs cannot be reduced, but another product could be made that would increase profit contribution to $8,000 if the components were acquired externally. If cost maximization is a major consideration and the company would prefer to buy the components, what is the maximum external price that Swifty would be willing to accept for the 1,000 units externally?
Swifty produces 1,000 units of necessary components with the following costs: Direct material - $30,000 Direct Labor - $19,000 Variable Overhead - $3,000 Fixed Overhead - $7,000. The Fixed Overhead costs cannot be reduced, but another product could be made that would increase profit contribution to $8,000 if the components were acquired externally. If cost maximization is a major consideration and the company would prefer to buy the components, what is the maximum external price that Swifty would be willing to accept for the 1,000 units externally?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Swifty produces 1,000 units of necessary components with the following costs:
Direct material - $30,000
Direct Labor - $19,000
Variable Overhead - $3,000
Fixed Overhead - $7,000.
The Fixed Overhead costs cannot be reduced, but another product could be made that would increase profit contribution to $8,000 if the components were acquired externally. If cost maximization is a major consideration and the company would prefer to buy the components, what is the maximum external price that Swifty would be willing to accept for the 1,000 units externally?
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