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Foster Company produces a component used in the production of its product. When 10,000 items are produced, the costs per unit are: Direct materials Direct
Foster Company produces a component used in the production of its product. When 10,000 items are produced, the costs per unit are: Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Total $0.75 3.00 1.50 1.60 $6.85 Horton, Inc. has offered to sell to Foster Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 if Foster accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated. Required: What is the relevant per unit cost for the original part? b. Which alternative is best for Foster Company? By how much? a
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