Lewis Auto Company Manufactures a Part for Use in Its

question 171

Essay

Lewis Auto Company manufactures a part for use in its production of automobiles.When 10,000 items are produced, the costs per unit are:
Monty Company has offered to sell Lewis Auto Company 10,000 units of the part for $120 per unit.The plant facilities could be used to manufacture another part at a savings of $180,000 if Lewis Auto accepts the supplier's offer.In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated.Required:
a.What is the relevant per unit cost for the original part?
b.Which alternative is best for Lewis Auto Company? By how much?

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Definitions:

O Proposition

In traditional logic, an O proposition is a type of categorical statement that asserts some S are not P, where S and P are the subject and predicate respectively.

Contrary

Opposite in nature, direction, or meaning; conflicting with each other.

Contraries

In the traditional square of opposition, a pair of categorical propositions that, in virtue of their logical form, could not both be true but could both be false (A and E).

Universal

Pertaining to or affecting the whole or applicable in all cases; general.