Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $36 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$6? Unit-level labor cost$5? Unit-level overhead$4? Batch-level cost (5000 units per batch)$21,000? Product-level supervisory salaries$45,500? Allocated facility-level costs$36,000? Assume that the company needs 10,000 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. $205,500.
B. $273,500.
C. $216,500.
D. $252,500.
Answer: A
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