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? Relevant Costs
(Manufacture and Purchase)Decision
A)$50 and $45 Manufacture
B)$50 and $45 Purchase
C)$45 and $40 Purchase
D)$45 and $40 Manufacture

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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? Relevant Costs
(Manufacture and Purchase)Decision
A)$50 and $45 Manufacture
B)$50 and $45 Purchase
C)$45 and $40 Purchase
D)$45 and $40 Manufacture

A Company Manufactures Chips Used in the Production of Computers