BoraBora Inc. produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of

6,500

units, are as follows:

Direct materials	$4.40
Direct labor	$4.20
Variable manufacturing overhead	$3.20
Fixed manufacturing overhead	$1.40
Total cost	$13.20
The fixed overhead costs are unavoidable.

Maldives Company has offered to sell

6,500

units of the same part to BoraBora Inc. for

$14.10

per unit. Assuming the company has no other use for its facilities, what should BoraBora Inc. do?

A.Make the part and save

$2.30

per unit.

B.Make the part and save

$6.20

per unit.

C.Make the part and save

$10.40

per unit.

D.Buy from Suri and save

$0.90

per unit.

2.The management team looked at the electric bill for its business and determined that the highest bill,

$5,000,

occurred in July when

4,000

cars were washed and the lowest bill,

$3,000,

occurred in February when

2,000

cars were washed. What was the fixed portion of the electric bill? (Round intermediary calculations to the nearest cent. Use the "high" data month to calculate your final answer. Do not use the "low" month, as it will result in an approximation of the cost.)

A.

$3,000

B.

$2,000

C.

$4,000

D.

$1,000