Essay
Revved Up Toys manufactures a computer chip used in the production of remote control cars. When 6,000 cars are produced, the costs per part are:
Sam's Associates has offered to sell Revved Up Toys 6,000 parts for $5.75 each. If Revved Up Toys accepts the offer, $1.00 of the fixed manufacturing overhead costs can be eliminated.
a. What is the relevant per unit cost to manufacture the part?
b. Which alternative is best for Revved Up Toys and by how much?
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