Sheffield Music produces 59600 blank CDs on which to record music. The CDs have the following costs:

Direct Materials	$11200
Direct Labour	15500
Variable Overhead	3100
Fixed Overhead	7200

Sheffield could avoid $4200 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the 59600 units externally, what is the maximum external price that Sheffield would expect to pay for the units?

$32800

$29800

$37000

$34000

2)

It costs Waterway Fields $15 of variable costs and $6 of allocated fixed costs to produce an industrial trash can that sells for $30. A buyer in Mexico offers to purchase 3150 units at $19 each. Waterway has excess capacity and can handle the additional production. What effect will acceptance of the offer have on net income?

decrease $4725

increase $4725

increase $59850

increase $12600