Great Products Company currently outsources a relay switch that is a component in one of its products. The switches cost $40 each. The company is considering making the switches internally at the following projected annual production costs:
| Unit-level material cost | $ | 8 |
| Unit-level labor cost | $ | 7 |
| Unit-level Overhead | 6 | |
| Batch-level set-up cost (4,000 units per batch) | $ | 30,000 |
| Product-level supervisory salaries | $ | 40,000 |
| Allocated facility-level costs | $ | 25,000 |
The company expects an annual need for 4,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $2,000 a month. If the company decides to make the parts, total costs will be:
$25,000 less than if the switches are purchased.$43,000 more than if the switches are purchased.$18,000 more than if the switches are purchased.$22,000 less than if the switches are purchased.
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