Car Parts Company manufactures a part for use in its production of automobiles.The costs per unit when 10,000 items are produced are:
Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60.The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer.In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated.Required:
a.What is the relevant per unit cost for the original part?
b.Which alternative is best for Car Parts Company? By how much?

Question

Car Parts Company manufactures a part for use in its production of automobiles.The costs per unit when 10,000 items are produced are:
  Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60.The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer.In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated.Required:
a.What is the relevant per unit cost for the original part?
b.Which alternative is best for Car Parts Company? By how much?

Quizplus · Accepted Answer

The Answer of Car Parts Company manufactures a part for use in its production of automobiles.The costs per unit when 10,000 items are produced are:
  Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60.The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer.In addition, $10 per unit of fixed manufacturing overhead on the original part would be eliminated.Required:
a.What is the relevant per unit cost for the original part?
b.Which alternative is best for Car Parts Company? By how much?

Car Parts Company Manufactures a Part for Use in Its