Sheridan Company can produce 100 units of a component part with the following costs: Direct Materials $22000 Direct Labor 6500 Variable Overhead 20000 Fixed Overhead 11000 If Sheridan Company can purchase the units externally for $55000, by what amount will its total costs change?

An increase of $55000

A decrease of $11000

An increase of $15500

An increase of $6500

2. Vaughn Manufacturing can produce 100 units of a component part with the following costs:

Direct Materials	$25000
Direct Labor	5500
Variable Overhead	13000
Fixed Overhead	11000

If Vaughn Manufacturing can purchase the component part externally for $50000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

3.

Bramble Music produces 60000 CDs on which to record music. The CDs have the following costs:

Direct Materials	$12000
Direct Labor	14000
Variable Overhead	2000
Fixed Overhead	7000

Bramble could avoid $4000 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 60000 units externally, what is the maximum amount that Bramble should pay to purchase the units?