Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.80 each. Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials $ 5,400 Unit-level labor 6,400 Unit-level overhead 3,900 Product-level costs* 10,500 Allocated facility-level costs 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Adams for $2.80 each. Required Calculate the total relevant cost. Should Adams continue to make the containers? Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7EB: Oat Treats manufactures various types of cereal bars featuring oats. Simmons Cereal Company has...
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Question
Adams Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows.
| Unit-level materials | $ | 5,400 | |
| Unit-level labor | 6,400 | ||
| Unit-level overhead | 3,900 | ||
| Product-level costs* | 10,500 | ||
| Allocated facility-level costs | 28,200 | ||
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Adams for $2.80 each.
Required
-
Calculate the total relevant cost. Should Adams continue to make the containers?
-
Adams could lease the space it currently uses in the manufacturing process. If leasing would produce $12,500 per month, calculate the total avoidable costs. Should Adams continue to make the containers?
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