EON Limited manufactures 30,000 units of part EA5 each year for use on its production line. At this level of activity, the cost per unit for part EA5 is:

Direct Materials............................... $3.60

Direct Labour.................................. $10.00

Variable Manufacturing Overhead...$2.40

Fixed Manufacturing Overhead......$9.00

Total cost per part........................ $25.00

An outside supplier has offered to sell 30,000 units of part EA5 each year to EON Limited for $21 per part. If EON Limited accepts this offer, the facilities now being used to manufacture part EA5 could be rented to another company at an annual rental of $80,000. However, EON Limited has determined that two-thirds of the fixed manufacturing overhead being applied to part EA5 would continue even if part EA5 were purchased from the outside supplier.

Required:

(2 marks) - (a) The relevant cost per unit if EON Ltd. produces the product by itself is $ ________/unit unanswered

(2 mark) - (b) The total relevant cost if EON Ltd. produces the product by itself is $ ________ unanswered

(1 mark) - (c) The total relevant cost if EON Ltd. purchases the product from the outside supplier is $ ________ unanswered

(2 marks) - (d) Should EON accept the offer or not? Explain.