Question
The Georgia Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 10,000 units of Part No. 498
The Georgia Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 10,000 units of Part No. 498 is as follows:
The Clayton Company has offered to sell 10,000 units of Part No. 498 to Georgia Co. for $71 per unit. Georgia Co. will make the decision to buy the part from Clayton if there is an overall savings of at least $45,000 for Georgia Co. If Georgia Co. accepts Claytons offer, $11 per unit of the fixed overhead allocated would be eliminated. Furthermore, Georgia Co. has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575. For Georgia to achieve an overall savings of $45,000, the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No. 575 would be which of the following
| $125,000 |
| $100,000 |
| $30,000 |
| $115,000 |
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