Kirkland Company Manufactures a Part for Use in Its Production

question 87

Essay

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

---

Definitions:

Low-tech

Technologies that are not advanced or complex, often easy to use and with a focus on practicality and accessibility.

Substance Abusing Employees

Workers who engage in the excessive or harmful use of drugs or alcohol, potentially impacting their performance and workplace safety.

Alcoholics Anonymous

A worldwide fellowship designed to help individuals who believe they have a drinking problem, offering a program of recovery through mutual support and shared experiences.

Employee Assistance Program

A workplace initiative that provides confidential support, counseling, and assistance to employees facing personal or job-related challenges.