Benson Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The
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Question:
Benson Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows:
Unit-level materials | $ | 5,400 | |
Unit-level labor | 6,300 | ||
Unit-level overhead | 3,300 | ||
Product-level costs* | 12,000 | ||
Allocated facility-level costs | 26,900 | ||
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Benson for $2.70 each.
Required
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Calculate the total relevant cost. Should Benson continue to make the containers?
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Benson could lease the space it currently uses in the manufacturing process. If leasing would produce $11,400 per month, calculate the total avoidable costs. Should Benson continue to make the containers?
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