None of musics fixed overhead costs can be reduced but, Ask an Expert

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Music produces 60,000 CDs on which to record music. The CDs have the following costs:
Direct Materials $11,000
Direct Labor 15,000
Variable Overhead 3,000
Fixed Overhead 7,000
None of Music's fixed overhead costs can be reduced, but another product could be made that would increase contribution margin by $9,000 if the CDs were acquired externally. The purchase price for 60000 cds from the outside supplier is $37,000. Should Music buy the 60,000 units?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M983700

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