HGB Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are:

Direct materials $0.60

Direct manufacturing labor 3.00

Variable manufacturing overhead 1.20

Fixed manufacturing overhead 1.60

Total $6.40

LKN Company has offered to sell to HGB 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 HGB accepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.

Required:

1. What is the relevant per unit cost for the original part?
2. Which alternative is best for HGB Company? By how much?