Deuce Company Currently Produces 10,000 Units of a Key Part

Multiple Choice

Deuce Company currently produces 10,000 units of a key part at a total cost of $512,000. Variable costs are $300,000. Of the fixed cost, $140,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part for $48 per unit. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $30,000. Alternately, the facilities could be rented out at $60,000. Given all of these alternatives, is Deuce Company's lowest net cost per unit for the part.

A) $42
B) $48
C) $44
D) $30