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Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,700 6,800 3,800 8,400 27,300 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.70 each. Required a. Calculate the total relevant cost. Should Adams continue to make the containers? b. Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $11,100 per month, calculate the total avoidable costs. Should Adams continue to make the containers? Answer is complete but not entirely correct. a. 25,700 Yes Total relevant cost Should Adams continue to make the containers? Total avoidable cost Should Adams continue to make the containers? b. 36,800 X No
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