Fame Company manufactures engines. Fame produces all the parts necessary for its engines, except for one electronic component, which is purchased from two local suppliers: Hydra International and Parable Company. Both suppliers are reliable and rarely deliver late. Hydra sells the component for $12.00 per unit, while Parable sells the same component for $10.00. Fame purchases 80% of its components from Parable because of the lower price it offers. The total annual demand is 95,000 units.

I. Activity Data
	Activity Cost
Inspecting components (sampling only)	$ 210,000
Reworking products (due to failed component)	$2,454,000
Warranty work (due to failed component)	$1,923,000

II. Supplier Data
	Hydra	Parable
	International	Company
Unit purchase price	$12.00	$10.00
Units purchased	19,000	76,000
Sampling hours	60	2,600
Rework hours	150	3,800
Warranty hours	550	7,000

Suppose that Fame loses $3,500,000 in sales per year because of its reputation for defective units attributable to failed components. Using warranty hours, assign the proportional cost of lost sales to Hydra International. What is the increase in the cost per component? (Note: Round the lost sales per warranty hour and the cost of the component to two decimal places.)

a.$13.42 per unit

b.$8.95 per unit

c.$25.72 per unit

d.$4.65 per unit