Question
Perez & Perez manufactures refrigerators. One of its production lines produces the compressors. Variable costs per compressor is $640. The fixed costs allocated to the
Perez & Perez manufactures refrigerators. One of its production lines produces the compressors. Variable costs per compressor is $640. The fixed costs allocated to the production line are $150,000 per month. Yuma Ltd produces compressors and offered to Perez & Perez to sell them 1,800 compressors they need per month at $700 each. If Perez & Perez accept the offer from Yuma Ltd, fixed costs allocated to the production line can be reduced to $40,000 per month. Based on quantitative analysis, what would be your decision? a. Do not accept the offer because the total cost increases by $68,000 b. None of the options is correct c. Accept the offer because the total cost per month decreases by $2,000 d. Accept the offer because the total cost per month decreases by $110,000 e. Do not accept the offer because the cost increases by $60 per compressor
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