Logan Manufacturing currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $$23$ each. The company is considering making the switches internally and has conducted a study to determine the costs involved. The costs below are projected annual production costs:

Unit$-$level material cost $ $4$

Unit$-$level labor cost $ $3$

Unit$-$level overhead $ $2$

Batch$-$level cost $(9,000$ units per batch$)$ $ $26,000$

Product$-$level supervisory salaries $ $48,000$

Allocated facility$-$level costs $ $41,000$

Assume that the company needs $18,000$ of the switches. Assume also that the company will still be operating within the relevant range. The supervisor will need to be hired for the production of the part. If Logan decides to make the parts under these conditions, the total relevant costs will be:

Multiple Choice

$$277,000.$

$$236,000.$

$$262,000.$

$$303,000.$

$13$

Logan Manufacturing currently outsources a part that is a component in one of its products. The parts cost $$36$ each. The company is considering making the part internally at the following projected annual production costs:

direct material cost $ $5$

direct labor cost $ $4$

variable overhead $ $3$

Batch$-$level set$-$up cost for this part $(5,000$ units per batch$)$ $ $47,000$

Product$-$level supervisory salaries $ $48,500$

Allocated fixed facility$-$level costs $ $42,000$

The company expects an annual need for $5,000$ switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $$3,700$ a month. The supervisor will need to be hired for the production of this part. If the company decides to make the part, total costs will be:

Multiple Choice

$$61,900$ more than if the switches are purchased.

$$19,900$ more than if the switches are purchased.

$$42,000$ less than if the switches are purchased.

$$28,600$ less than if the switches are purchased.