Reference no: EM132807182

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

Direct Materials     $18000

Direct Labor        20000

Variable Overhead  4500

Fixed Overhead       7000

Problem 1: None of Sunland 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 Sunland Company would be willing to accept to acquire the 60000units externally?

Option 1: $46500

Option 2: $45500

Option 3: $53500

Option 4: $49500