BLUE Company needs 10,000 units of a certain part to be used in production. If BLUE buys the part from RED Company instead of making it, BLUE could not use the present facilities for another manufacturing activity. Sixty percent (60%) of the fixed overhead applied will continue regardless of what decision is made. The following quantitative information is available regarding the situation presented: Cost to BLUE to make the part: Direct materials $ 7 Direct labor 24 Variable overhead 12 Fixed overhead applied 15 $58 Cost to buy the part from RED company $53 38. In deciding whether to make or buy the part, BLUE' s total relevant cost to make the part is a. $352,000. b. $490,000. c. $540,000. d. $580,000. 39. SunDevil Co. plans to sell 200,000 special Rose Bowl footballs with fixed costs of $400,000 and variable expenses at 60% of sales. To have a net income of $100,000 SunDevil management must set the sales price at a. $3.75 b. $4.17 c. $5.00 d. $6.25 40. What effect would a decrease in wage rates (applicable to direct, strictly variable, labor) have on the break-even point and the contribution margin?

Break-even Point    Contribution Margin a. Increase           Increase b. Increase           Decrease c. Decrease          Increase d. Decrease          Decrease