Copter Company currently produces a key part at a total cost of $210,000.Variable costs are $170,000.Of the fixed cost, $10,000 relate specifically to this part.The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part 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.Alternately, the facilities could be rented out at $60,000.Given all of these alternatives, _____ is Copter's lowest net cost for the part.
A)$170,000
B)$180,000
C)$190,000
D)$130,000

Question

Quizplus · Accepted Answer

The lowest net cost is $130,000. If Copter rents out the facilities, they save $60,000, reducing the cost of buying the part ($190,000) to $130,000.

Copter Company Currently Produces a Key Part at a Total