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Vaughn Music produces 60500 blank CDs on which to record music. The CDs have the following costs:
Direct Materials $11900
Direct Labour 15100
Variable Overhead 3100
Fixed Overhead 7300
Question 1: Vaughn could avoid $3500 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 60500 units externally, what is the maximum external price that Vaughn would expect to pay for the units?
Option 1: $33900
Option 2: $30100
Option 3: $37400
Option 4: $33600
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