Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $22 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 (7,000 units per batch)	$	44,000
Product-level supervisory salaries	$	47,000
Allocated facility-level costs	$	39,000

The company expects an annual need for 7,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $3,400 a month. If the company decides to make the parts, total costs will be:

Multiple Choice

• $19,800 more than if the switches are purchased.

• $58,800 more than if the switches are purchased.

• $27,200 less than if the switches are purchased.

• $39,000 less than if the switches are purchased.