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Home Q & A Board Other Fields Homework Help Business Accounting
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jerico jerico
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9 years ago
Kirkland 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

Mike Company has offered to sell to Kirkland 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 Kirkland 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 Kirkland Company? By how much?
Textbook 
Cost Accounting

Cost Accounting


Edition: 14th
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cyborgcyborg
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9 years ago
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jerico Author
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#2
9 years ago
This solved my problem perfectly, thank you for your kind input.
wrote...
#3
9 years ago
Sweet, you're welcome.
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