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Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $22 each. The company is
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 Unit-level labor cost Unit-level overhead Batch-level set-up cost (7,000 units per batch) Product-level supervisory salaries Allocated facility-level costs $ 5 4 3 $27,000 $38,500 $22,000 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 $1,700 a month. If the company decides to make the parts, total costs will be: Multiple Choice $15,900 more than if the switches are purchased. $22,600 less than if the switches are purchased. $22,000 less than if the switches are purchased. $37,900 more than if the switches are purchased.
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