Question - Janice Foeld Company manufactures part Z for use in its production cycle. The costs per unit for 10,000 units of part Z are as follows.
|
Direct materials
|
$3
|
|
Direct labor
|
15
|
|
Variable overhead
|
6
|
|
Fixed overhead
|
8
|
|
TOTAL
|
$32
|
Baloney Company has offered to sell Janice Foeld 10,000 units of part Z for $30 per unit. If Janice Foeld accepts Baloney's offer, the released facilities can be used to save $45,000 in relevant costs in the manufacture of part A. In addition, $5 per unit of the fixed overhead applied to part Z would be totally eliminated.
The total relevant costs to buy part Z are
a) $320,000.
b) $300,000.
c) $290,000.
d) $255,000.