Melita Sailboats Company manufactures 100 luxury yachts per month

A compact media center is included in each yacht. Melita Sailboats manufactures the media center in-house but is considering the possibility of outsourcing this function. At present, the variable cost per unit is $280, and the fixed costs are $40,000 per month. If it outsources the media centers, fixed costs could be reduced by half, and the vacant facilities could be rented out to earn $4,000 per month of rental income. At what contract cost would outsourcing pay off for Melita?
A) $520 per unit
B) $480 per unit
C) $280 per unit
D) $400 per unit

A .A)
Savings in variable cost (100 x $280 ) $28,000
Savings in fixed cost ($40,000 x 0.50 ) 20,000
Rent from vacant facilities 4,000
Total savings $52,000
No. of yachts manufactured per month 100
Contract cost ($52,000 / 100 ) $520