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Key Company produces K-104 a type of computer microprocessor. The cost per unit based on...

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Accounting

Key Company produces K-104 a type of computer microprocessor. The cost per unit based on a volume of 10,000 units produced monthly is:
Direct materials $ 3
Direct labor 15
Indirect costs
Variable 6
Fixed 8
Cost per unit $32
Clave has an offer to sell the 10,000 units of inventory it needs for the next month for $30/unit. If he accepts the offer, the physical plant will have idle space that can be used to process other products and will allow him to save $45,000 in costs. In addition, fixed overhead costs per unit will be reduced by $5.
Required
1- Identify (separately) the relevant and non-relevant costs when evaluated in light of this alternative you have Key. Why are they relevant or not relevant? Explain.
2- Which alternative is better for the company: to buy or to produce? Demonstrate. In addition, discuss at least one qualitative factor that should be taken into account in the decision.

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