A company manufactures chips used in the production of computers. The chips can be purchased for $50 each from an outside vendor. It costs the manufacturer $60 a chip to produce them, of which 25% is fixed overhead cost. What are the relevant costs for this decision? Based on these costs, which option should the company choose? $\begin{array}{ll}\text { Relevant Costs }\
\text { (Purchase and Manufacture) } & \text { Decision }\
\text { a) } \$ 50 \text { and } \$ 45 & \text { Manufacture } \
\text { b) } \$ 50 \text { and } \$ 45 & \text { Purchase } \
\text { c) } \$ 45 \text { and } \$ 40 & \text { Purchase } \
\text { d) } \$ 45 \text { and } \$ 40 & \text { Manufacture }
\end{array}$

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The Answer of A company manufactures chips used in the production of computers. The chips can be purchased for $50 each from an outside vendor. It costs the manufacturer $60 a chip to produce them, of which 25% is fixed overhead cost. What are the relevant costs for this decision? Based on these costs, which option should the company choose? $\begin{array}{ll}\text { Relevant Costs }\
\text { (Purchase and Manufacture) } & \text { Decision }\
\text { a) } \$ 50 \text { and } \$ 45 & \text { Manufacture } \
\text { b) } \$ 50 \text { and } \$ 45 & \text { Purchase } \
\text { c) } \$ 45 \text { and } \$ 40 & \text { Purchase } \
\text { d) } \$ 45 \text { and } \$ 40 & \text { Manufacture }
\end{array}$

A Company Manufactures Chips Used in the Production of Computers