Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $20 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: Assume that the company needs 15,000 of the switches, which would be produced in three 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:

Question

Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $20 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:  Assume that the company needs 15,000 of the switches, which would be produced in three 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:

Quizplus · Accepted Answer

Relevant cost for expected production of the electrical switches:
 11ea7feb_d1d8_58e6_a768_b79dea542b4d_TB3570_00_TB3570_00_TB3570_00 The allocated factory-level costs are not relevant because the company will incur them whether it accepts or rejects the special order.

Safety Products Currently Outsources an Electrical Switch That Is a Component