Dell contracts with its suppliers to pre-kit certain component parts before delivering them to Dell. Assume this saves \(\$ 1.5\) million of the kitting cost and reduces the total number of parts by 400 million (because Dell considers each pre-kit as one part). If a desktop now uses 80 parts, what is the new kitting cost assigned to one desktop?

a. \(\$ 2.80\)

b. \(\$ 0.70\)

c. \(\$ 0.9375\)

d. \(\$ 1.00\)

Two of Dell's production activities are kitting (assembling the raw materials needed for each computer in one kit) and boxing the completed products for shipment to customers. Assume that Dell spends \(\$ 5\) million a month on kitting and \(\$ 10\) million a month on boxing. Dell allocates

- Kitting costs based on the number of parts used in the computer

- Boxing costs based on the cubic feet of space the computer requires Suppose Dell estimates it will use 500 million parts a month and ship products with a total volume of 20 million cubic feet.

Assume that each desktop computer requires 100 parts and has a volume of 5 cubic feet.