Ruth Company produces 1000 units of a necessary component with the following costs: $$\begin{array} { l r }
\text { Direct Materials } & \$ 34,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 9,000 \
\text { Fixed Overhead } & 10,000
\end{array}$$ Ruth Company could avoid $6000 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 1000 units externally?

Question

Ruth Company produces 1000 units of a necessary component with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 34,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 9,000 \
\text { Fixed Overhead } & 10,000
\end{array}$$ Ruth Company could avoid $6000 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 1000 units externally?

Quizplus · Accepted Answer

The Answer of Ruth Company produces 1000 units of a necessary component with the following costs: $$\begin{array} { l r } 
\text { Direct Materials } & \$ 34,000 \
\text { Direct Labor } & 15,000 \
\text { Variable Overhead } & 9,000 \
\text { Fixed Overhead } & 10,000
\end{array}$$ Ruth Company could avoid $6000 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 1000 units externally?

Ruth Company Produces 1000 Units of a Necessary Component with the Following