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

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

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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