DowlingComputers makes5,000units of a circuitboard,CB76 at a cost of$280

each. Variable cost per unit is$220and fixed cost per unit is$60.Peach Electronics offers to supply5,000units of CB76 for

$260.IfDowlingbuys from Peach it will be able to save$10per unit in fixed costs but continue to incur the remaining$50per unit. ShouldDowling

acceptPeach'soffer? Explain

1.DowlingComputers makes5,000units of a circuitboard,CB76 at a cost of$280

each. Variable cost per unit is$220and fixed cost per unit is$60.Peach Electronics offers to supply5,000units of CB76 for$260.IfDowlingbuys from Peach it will be able to save$10per unit in fixed costs but continue to incur the remaining$50per unit. ShouldDowlingacceptPeach'soffer? Explain.

Begin by calculating the relevant cost per unit.(Ifa box is not used in thetable,leave the boxempty;do not enter azero.)

Make

Buy

Relevant costs:

Unit relevant cost

DowlingComputers shouldaccept/rejectPeach'soffer. When comparing relevant costs between thechoices,Peach's offer price ishigher/lowerthan the cost to continue to produce.