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What is the maximum external price

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Question - Oriole Company produces 60000 CDs on which to record music. The CDs have the following costs:

Direct Materials $14000

Direct Labor 16500

Variable Overhead 4000

Fixed Overhead 7000

None of Oriole Company's fixed overhead costs can be reduced, but another product could be made that would increase profit contribution by $4000 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 Oriole Company would be willing to accept to acquire the 60000 units externally?

a. $37500

b. $38500

c. $45500

d. $41500

Reference no: EM132630171

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