Benitez Company Currently Outsources a Relay Switch That Is a Component

question 81

Multiple Choice

Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $28 each. The company is considering making the switches internally at the following projected annual production costs: $\begin{array}{llr} \text { Unlt-level materlal cost } &\$4\\ \text { Unit-level labor cost } &\$3\\ \text { Unit-level overhead } &\$2\\ \text { Batch-level set-up cost ( 6,000 units per batch) } &\$43,000\\ \text {Product-level supervisory salaries } &\$46,500\\ \text { allocated facilitv-level costs } &\$38,000\\\end{array}$
The company expects an annual need for 6,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $3,300 a month. If the company decides to make the parts, total costs will be:

• A) $15,100 more than if the switches are purchased.
• B) $53,100 more than if the switches are purchased.
• C) $31,400 less than if the switches are purchased.
• D) $38,000 less than if the switches are purchased.

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