Relevant costs for decision making Kentucky Motors has manufactured com¬

pressor parts at its plant in Pitcairn, Indiana, for the last 18 years. An outside sup¬ plier, Superior Compressor Company, has offered to supply compressor model A238 at a price of $200 per unit. Unit manufacturing costs for A238 are as fol¬ lows:

REQUIRED

(a) Should Superior Compressor's offer be accepted if the plant is presently op¬ erating below capacity?

(b) What is the maximum acceptable purchase price if the plant facilities are fully utilized at present and if any additional available capacity can be de¬ ployed for the production of other compressors?

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Direct materials Direct labor Unit-related support Batch-related support Product-sustaining support Facility-sustaining support Total costs $ 80 60 26 22 8 17 $213