Maddox, a Division of Stanley Enterprises, Currently Performs Computer Services

Maddox, a division of Stanley Enterprises, currently performs computer services for various departments of the firm. One of the services has created a number of operating problems, and management is exploring whether to outsource the service to a consultant. Traceable variable and fixed operating costs total $80,000 and $25,000, respectively, in addition to $18,000 of corporate administrative overhead allocated from Stanley. If Maddox were to use the outside consultant, fixed operating costs would be reduced by 70%. The irrelevant costs in Maddox's outsourcing decision total:

A) $17,500.
B) $18,000.
C) $25,000.
D) $25,500.
E) None of the other answers are correct.

Correct Answer:

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