stin studied relevant costing in his introductory and upper$-$level accounting courses, but never thought he would use those skills$$let alone so soon! Yet here he is$,$ in the second month of his summer internship at a snowmobile and personal watercraft manufacturing company. His boss, Jeff, needs help. The company currently makes its own handlebar kits for all snowmobile models and personal watercraft models. Variable costs to produce one batch of $120$ units are as follows.

Variable Costs to Make

DM $$12,000$

DL $16,000$

Variable$-$MOH $3,000$

The company$$s fixed manufacturing costs related to the handlebar kits amount to $$15,000.$ One$-$third of these costs are avoidable if it chooses to buy these components rather than make them in$-$house. Jeff is receiving some pressure from company executives to find cost savings in operations and processes. The handlebar kit is the starting point in his review of products and processes.

Required

What is the relevant cost to make one handlebar kit?

If a supplier approached Justin$$s boss and offered to sell the company handlebar kits for $$400$ each, what would Jeff$$s response be$?$ Why?

If a supplier offered to sell the company handlebar kits for $$250$ each, what would Jeff$$s response be$?$ Describe what other factors would be relevant to this decision.

Jeff conducts additional research to determine if the handlebar manufacturing space could be used for any other purpose. He finds that if the company can free up that space, it can be used to increase production volume for snowmobiles and watercraft. Given that demand for these products has been strong, the company feels confident it could sell the higher volume of products with no difficulty. This additional volume would increase the company$$s operating income by $$10,000.$ Does this situation change your answer to either part $($b$)$ or part $($c$)?$ Explain.