Car Parts Company Manufactures a Part for Use in Its

question 130

Essay

Car Parts Company manufactures a part for use in its production of automobiles. The costs per unit when 10,000 items are produced are:
Auto Company has offered to sell to Car Parts Company 10,000 units of the part for $60. The plant facilities could be used to manufacture another part at a savings of $90,000 if Car Parts accepts the offer. In addition, $10 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 Car Parts Company? By how much?

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Definitions:

Common Law

A legal system based on court precedents and customs rather than written laws.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States, intended to standardize and harmonize laws across states.

Trees

Perennial plants with elongated stems, or trunks, supporting branches and leaves.

Choice-Of-Law

A contractual clause that specifies which jurisdiction's laws will govern in the interpretation and dispute resolution of a contract.