Question
Perez 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
Perez 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 $ 6,100 Unit-level labor 6,400 Unit-level overhead 3,600 Product-level costs* 8,400 Allocated facility-level costs 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Perez for $2.50 each. Required Calculate the total relevant cost. Should Perez continue to make the containers? Perez could lease the space it currently uses in the manufacturing process. If leasing would produce $11,200 per month, calculate the total avoidable costs. Should Perez continue to make the containers?
Perez 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 $ 6,100 6,400 3,600 8,400 27,500 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Perez for $2.50 each. Required a. Calculate the total relevant cost. Should Perez continue to make the containers? b. Perez could lease the space it currently uses in the manufacturing process. If leasing would produce $11,200 per month, calculate the total avoidable costs. Should Perez continue to make the containers? Total relevant cost Should Perez continue to make the containers? Total avoidable cost Should Perez continue to make the containersStep by Step Solution
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