Safety Products Currently Outsources an Electrical Switch That Is a Component

Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $24 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: $\begin{array}{llr} \text { Unlt-level materlal cost } &\$5\\ \text { Unit-level labor cost } &\$4\\ \text { Unit-level overhead } &\$2\\ \text { Batch-level set-up cost ( 7,000 units per batch) } &\$13,000\\ \text {Product-level supervisory salaries } &\$41,500\\ \text { allocated facilitv-level costs } &\$28,000\\\end{array}$
Assume that the company needs 14,000 of the switches, which would be produced in two batches. Assume also that the company will still be operating within the relevant range. If Safety decides to make the parts under these conditions, the total relevant costs will be:

A) $263,500.
B) $222,500.
C) $250,500.
D) $235,500.

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free