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 $0.75

Direct manufacturing labor 3.00

Variable manufacturing overhead 1.50

Fixed manufacturing overhead 1.60

Total $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:

a. What is the relevant per unit cost for the original part?

b. Which alternative is best for Foster Company? By how much?