In the last 6 months, demand for one of Dormin Companys products has dropped off considerably, because of it becoming obsolescent as a result of technological change. The equipment used in the manufacture of this product may not be easy to sell, Dormin spent $50,000 on consultants to determine whether it could use the equipment to produce a new product under license by another company. The consultant has determined that this product would have variable production costs of $65 per unit and should sell at a price of $90/unit. The licensing royalty is 5% of gross product revenue. Estimated annual demand is 20,000 units per year. Additional annual operating costs related to this product are $30,000/year (excluding depreciation). Depreciation on the equipment is $15,000/year.

The relevant costs are:

i) $30,000/year plus $69.5 per unit

ii) $45,000/year plus $74 per unit

iii) $30,000/year plus $65 per unit

iv) $45,000/year plus $65 per unit