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Problem 1: Sunny Enterprises makes a component that is used in the assembly of radios, the company's main product. For the component, the variable costs per unit are $18. Razor Edge Products wants to sell Sunny 10,000 units of the component for $22 per unit. Sunny will be able to avoid $30,000 in fixed overhead costs if it chooses to purchase the component externally. What is the cost or benefit of purchasing the component from Razor Edge?
Select one:
a. $70,000 costb. $40,000 costc. $10,000 costd. $10,000 benefit
In December 2012, Pavelka Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $ 15 per hour.
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