Freeman Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows:

Unit-level materials $5,900

Unit-level labor 6,300

Unit-level overhead 3,500

Product-level costs* 11,000

Allocated facility-level costs 28,100.

*One-third of these costs can be avoided by purchasing the containers.

Baxi Container Company has offered to sell comparable containers to Freeman for $2.70 each.

Required:

a-1 Calculate the total relevant cost.

a-2 Should Freeman continue to make the containers?

Yes or No

b-1 Freeman could lease the space it currently uses in the manufacuring process. If leasing would produce $12,100 per month, Calculate the total avoidable costs.