Kaiman Company Currently Produces a Key Part at a Total

question 48

Multiple Choice

Kaiman Company currently produces a key part at a total cost of $210,000.Annual variable costs are $170,000.Of the annual fixed costs,$10,000 relate specifically to this part.The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part annually for $200,000.The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $30,000 per year.Alternatively,the facilities could be rented out at $60,000 per year.Given all of these alternatives,what is Kaiman Company's lowest net relevant cost for the parts?

• A) $130,000
• B) $140,000
• C) $170,000
• D) $180,000

---

Definitions:

Infant

A very young child or baby, often legally defined as a person under a certain age, varying by jurisdiction.

Sue in Tort

Initiating a civil lawsuit based on tort law, seeking remedy for personal injuries or damages caused by wrongful acts.

Necessary

Essential or needed to achieve a desired result or fulfill a specific purpose.

Age of Majority

The legally defined age at which a person is considered an adult and is granted the full legal rights and responsibilities of adulthood.