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:

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. If the company decides to make the parts, total costs will be:

$10,500 more than if the switches are purchased.

$30,500 more than if the switches are purchased.

$27,000 less than if the switches are purchased.

$20,000 less than if the switches are purchased.

Unit-level material cost Unit-level labor cost Unit-level overhead Batch-level set-up cost (5,000 units per batch) Product-level supervisory salaries Allocated facility-level costs 3 $25,000 $37,500 $20,000