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Sarah's Talking Dolls Manufactures a Computer Chip Used in the Production

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Essay

Sarah's Talking Dolls manufactures a computer chip used in the production of dolls for children.When 5,000 dolls are produced,the costs per part are:
 Direct materials $2.00 Direct labor 1.50 Variable manufacturing overhead 1.75 Fixed manufacturing overhead 2.25 Total $7.50\begin{array} { | l | c | } \hline \text { Direct materials } & \$ 2.00 \\\hline \text { Direct labor } & 1.50 \\\hline \text { Variable manufacturing overhead } & 1.75 \\\hline \text { Fixed manufacturing overhead } & \underline { 2.25 } \\\hline \text { Total } & \$ 7.50 \\\hline\end{array} Sam's Associates has offered to sell Sarah's Talking Dolls 5,000 parts for $5.75 each.If Sarah accepts the offer,$1.00 of the fixed manufacturing overhead costs can be eliminated.
A.What is the relevant per unit cost to manufacture the part?
B.Which alternative is best for Sarah's Talking Dolls and by how much?

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Definitions:

Information Dependent

The state of requiring or heavily relying on information to make decisions or carry out tasks.

Anticipatory Socialization

The process of learning and adapting to the norms and expectations of a role or environment before formally entering it.

Encounter

An unexpected or casual meeting with someone or something.

Organizational Socialization

The process by which new employees learn the attitudes, knowledge, skills, and behaviors required to function effectively within an organization.

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