LIGHT INC manufactures 20,000 components of a particular product each year. The costs per unit of

this part are as follows;

Direct materials $ 7.00

Direct labor 5.00

Variable Overhead 8.00

Fixed Overhead 15.00

LIGHT INC. has received an offer to purchase the 20,000 parts from an outside supplier at $30 per unit. Assume that by purchasing the part from the outside supplier, $60,000 of fixed overhead cost per year could be avoided. Suppose the manufacturing facilities that are now being used to produce the component could be rented to another company for $80,000 per year.

Required: Calculate the total relevant costs involved in a make-or-buy decision (i.e., the total relevant costs of making 20,000 components of the product)

	A.	$20,000
	B.	$540,000
	C.	$400,000
	D.	$500,000
	E.	$700,000
	F.	$740,000
	G.	some other amount
	H.	$250,000