A Company Manufactures Chips Used in the Production of Computers

Short Answer

A company manufactures chips used in the production of computers. The chips can be purchased for $50 each from an outside vendor. It costs the manufacturer $60 a chip to produce them, of which 25% is fixed overhead cost. What are the relevant costs for this decision? Based on these costs, which option should the company choose? $\begin{array}{ll}\text { Relevant Costs }\\\text { (Purchase and Manufacture) } & \text { Decision }\\\text { a) } \$ 50 \text { and } \$ 45 & \text { Manufacture } \\\text { b) } \$ 50 \text { and } \$ 45 & \text { Purchase } \\\text { c) } \$ 45 \text { and } \$ 40 & \text { Purchase } \\\text { d) } \$ 45 \text { and } \$ 40 & \text { Manufacture }\end{array}$