Benitez Company currently outsources a relay switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs: Unit-level material cost$3 Unit-level labor cost$2 Unit-level overhead$1 Batch-level set-up cost (5,000 units per batch)$25,000 Product-level supervisory salaries$37,500 Allocated facility-level costs$20,000 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 $1,500 a month. If the company decides to make the parts, total costs will be:
A. $27,000 less than if the switches are purchased.
B. $30,500 more than if the switches are purchased.
C. $10,500 more than if the switches are purchased.
D. $20,000 less than if the switches are purchased.
Answer: C
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