Copter 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 $190,000.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 Copter Company's lowest net relevant cost for the part?
A)$130,000
B)$170,000
C)$180,000
D)$190,000

Question

Quizplus · Accepted Answer

The lowest net relevant cost is $130,000, calculated as the cost to buy the part ($190,000) minus the opportunity cost of renting out the facilities ($60,000).

Copter Company Currently Produces a Key Part at a Total