Dolphin Company Currently Produces 10,000 Units of a Key Part

question 60

Multiple Choice

Dolphin Company currently produces 10,000 units of a key part at a total cost of $512,000 annually.Variable costs are $300,000 annually.Of the annual fixed costs,$140,000 relate specifically to this part.The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part for $48 per unit.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 Dolphin Company's lowest net relevant cost for the parts?

• A) $420,000
• B) $440,000
• C) $450,000
• D) $480,000

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