Question

8. Award: 10.00 points Rooney Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,200 containers follows: Unit-level materials Unit-level labor Unit-level overhead Product-level costs Allocated facility-level costs $ 6.200 6.300 3,300 11.700 26,900 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rooney for $2.90 each. Required a. Calculate the total relevant cost. Should Rooney continue to make the containers? b. Rooney could lease the space it currently uses in the manufacturing process. If leasing would produce $10,900 per month, calculate the total avoidable costs. Should Rooney continue to make the containers? a. Total relevant cost Should Rooney continue to make the containers? b. Total avoidable cost Should Rooney continue to make the containers?

Answer 1

And A-1 Given that Production level costs are a ad en avoidable, Therefore Thus ford not relevant. only taken as Production level Costs. avoidable Cast: Calculation of Total Unit - level materials unit -level fabor unit level overhead Product - de vel costs Total avoidable costs Relevant costs $ 6200 & 6300 $ 3300 $ 3900 $ 1970o A-2 yes. As the Purchase price > Cost of production purchase price = 9200 x 2.90 - $26,680 Ibu Total avoidable Cost = $ 1090+ 1970 - $ 3060 b-2 No, Roney has to stp it is better to buy rather L: $30,000 > 26680] Producing since than producing.