Problem: Module $6$ Textbook Problem $6$

Learning Objective: $6-3$ Make appropriate outsourcing decisions

Benson 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

$$6,600$

$6,300$

$4,000$

$9,900$

$26,400$

$*$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\mathrm{.}80$ each.

Required

a$.$ Calculate the total relevant cost. Should Benson continue to make the containers?

b$.$ Benson could lease the space it currently uses in the manufacturing process. If leasing would produce $$12,400$ per month, calculate

the total avoidable costs. Should Benson continue to make the containers?