Cool Clothing, Inc. currently manufactures shirts. The company is interested in outsourcing production to a reputable manufacturing company that can supply the shirts for $10 per unit. Cool Clothing produces 20,000 shirts each year. Variable production costs are $4 per unit and annual fixed costs total $180,000. If production is outsourced, all variable costs and 60 percent of annual fixed costs will be eliminated.

What are the total production costs if the shirts are outsourced?

a) $120,000

b) $272,000

c) $200,000

d) $108,000