Answer the Following Questions Using the Information Below:
Casper's Engine

Multiple Choice

Answer the following questions using the information below:
Casper's Engine Company manufactures part TE456 used in several of its engine models.Monthly production costs for 1000 units are as follows:
$$\begin{array} { l r } \text { Direct materials } & \$ 40000 \\\text { Direct labour } & 10000 \\\text { Variable overhead costs } & 30000 \\\text { Fixed overhead costs } & \underline{ 20000 }\\\quad \text { Total costs } & \underline{ \$ 100000} \\\end{array}$$ It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier.Casper's Engine Company has the option of purchasing the part from an outside supplier at $85 per unit.
-If Casper's Engine Company accepts the offer from the outside supplier,the monthly avoidable costs (costs that will no longer be incurred) total:

A) $82 000
B) $100 000
C) $98 000
D) $50 000