Seven Seas Company Manufactures 100 Luxury Yachts Per Month

Seven Seas Company manufactures 100 luxury yachts per month. Included in each yacht is a compact media center. Seven Seas manufactures media center in-house, but is considering the possibility of outsourcing that function. At present, the variable cost per unit is $275, and the fixed costs are $39,000 per month. If they outsource, fixed costs could be reduced by half, and the vacant facilities could be rented out to earn $1,000 per month of rental income. At what contract rate would outsourcing pay off for Seven Seas?

A) $480 per unit
B) $499 per unit
C) $388 per unit
D) $295 per unit