Kirkland Company manufactures a part for use in its production of hats. When10,000 items are produced, the costs per unit are:
Direct materials $0.60
Direct manufacturing labor 3.00
Variable manufacturing overhead 1.20
Fixed manufacturing overhead 1.60
Total $6.40

Mike Company has offered to sell to Kirkland Company 10,000 units of the partfor $6.00 per unit. The plant facilities could be used to manufacture another itemat a savings of $9,000 if Kirkland accepts the offer. In addition, $1.00 per unit offixed 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?