Seminole Corporation Has Been Manufacturing 5,000 Units of Part 10541,which $\$2$

Seminole Corporation has been manufacturing 5,000 units of Part 10541,which is used in the manufacture of one of its products.At this level of production,the cost per unit of manufacturing Part 10541 is as follows:
Direct material                        $\$2$
Direct1abor                              8
Variable overhead                   4
Fixed overhe ad applied            $\underline{6}$
Total                                       $\underline{\$20}$

Luther Company has offered to sell Seminole 5,000 units of Part 10541 for $19 a unit.Seminole has determined that it could use the facilities currently used to manufacture Part 10541 to manufacture Part RAC and generate an operating profit of $4,000.Seminole has also determined that two-thirds of the fixed overhead applied will continue even if Part 10541 is purchased from Luther.To determine whether to accept Luther's offer,the net relevant costs to make are

A) $70,000.
B) $84,000.
C) $90,000.
D) $95,000.

Correct Answer:

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