Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Solomon 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
Unit-level labor
Unit-level overhead
Product-level costs*
Allocated facility-level costs
$ 6,000
6,300
3,800
10,500
27,900
*One-third of these costs can be avoided by purchasing the containers.
Russo Container Company has offered to sell comparable containers to Solomon for $2.80 each.
Required
a. Calculate the total relevant cost. Should Solomon continue to make the containers?
b. Solomon could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month,
calculate the total avoidable costs. Should Solomon continue to make the containers?
Answer is complete but not entirely correct.
a. Total relevant cost
$
25,480
a. Should Solomon continue to make the containers?
Yes
b. Total avoidable cost
$
26,600x
b. Should Solomon continue to make the containers?
No
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Transcribed Image Text:Solomon 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 Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 6,000 6,300 3,800 10,500 27,900 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Solomon for $2.80 each. Required a. Calculate the total relevant cost. Should Solomon continue to make the containers? b. Solomon could lease the space it currently uses in the manufacturing process. If leasing would produce $11,000 per month, calculate the total avoidable costs. Should Solomon continue to make the containers? Answer is complete but not entirely correct. a. Total relevant cost $ 25,480 a. Should Solomon continue to make the containers? Yes b. Total avoidable cost $ 26,600x b. Should Solomon continue to make the containers? No
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