Song, a Division of Carolina Enterprises, Currently Makes 100,000 Units

question 28

Multiple Choice

Song, a division of Carolina Enterprises, currently makes 100,000 units of a product that has created a number of manufacturing problems. Song's costs follow. $$\begin{array}{l}\text { Manufacturing costs: }\\\begin{array} { l r } \text { Variable } & \$ 540,000 \\\text { Fixed } & 180,000 \\\text { located corporate administrative cost } & 60,000\end{array}\end{array}$$ If Song were to discontinue production, fixed manufacturing costs would be reduced by 70%. The relevant cost of deciding whether the division should purchase the product from an outside supplier is:

• A) $540,000.
• B) $594,000.
• C) $666,000.
• D) $720,000.
• E) $726,000.

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