Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost $ 3 Unit-level labor cost $ 2 Unit-level overhead $ 1 Batch-level set-up cost (5,000 units per batch) $ 25,000 Product-level supervisory salaries $ 37,500 Allocated facility-level costs $ 20,000 The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. What will be the total cost if the company decides to make the parts be?
Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost $ 3 Unit-level labor cost $ 2 Unit-level overhead $ 1 Batch-level set-up cost (5,000 units per batch) $ 25,000 Product-level supervisory salaries $ 37,500 Allocated facility-level costs $ 20,000 The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. What will be the total cost if the company decides to make the parts be?
Chapter10: Short-term Decision Making
Section: Chapter Questions
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Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs:
| Unit-level material cost | $ | 3 | |
| Unit-level labor cost | $ | 2 | |
| Unit-level |
$ | 1 | |
| Batch-level set-up cost (5,000 units per batch) | $ | 25,000 | |
| Product-level supervisory salaries | $ | 37,500 | |
| Allocated facility-level costs | $ | 20,000 | |
The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month.
What will be the total cost if the company decides to make the parts be?
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