1. Quirch Inc. manufactures machine parts for aircraft engines. The CEO, Chucky Valters, was considering an offer from a subcontractor who would provide 2,400 units of product PQ107 for Valters for a price of $150,000. If Quirch does not purchase these parts from the subcontractor it must produce them in-house with the following costs:
Cost per Unit:
DM 31
DL 18
Variable Overhead 9
In addition to the above costs, if Quirch produces part PQ107, they would also have a retooling and design cost of $10,800. The relevant costs of producing 2,400 units of product PQ107 are:
A. $149,000.
B. $139,200.
C. $150,000.
D. $164,200.
2. A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. It can either be disposed of for $11,000 cash and be replaced with a similar boat costing $110,000, or rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned. The total relevant cost of replacing the boat is:
A. $97,000.
B. $98,000.
C. $99,000.
D. $110,000..