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Vernon Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,400 containers follows. Unit-level
Vernon Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,400 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,400 6,400 3,800 10,200 26,900 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Vernon for $2.80 each. Required a. Calculate the total relevant cost. Should Vernon continue to make the containers? b. Vernon could lease the space it currently uses in the manufacturing process. If leasing would produce $12,200 per month, calculate the total avoidable costs. Should Vernon continue to make the containers? a. Total relevant cost Should Vernon continue to make the containers? b. Total avoidable cost Should Vernon continue to make the containers
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