Relevant Costs

It is because they have the choice. The can either recruit 4 new employees which would cost them $160,000. Or alternatively, they can retrain the existing employees and also replace them in their current work. This would cost 15,000 + 100,000 = 115,000 They will do whichever of the two alternatives is the cheaper, which is the second one at a cost of $115,000. (This question is actually not likely these days in Paper F2. It is now more examinable in Paper F5)