Great Products Company currently outsources an electrical switch that is a component in one of its
products. The switches cost $20 each. The company is considering making the switches internally at the
following projected annual production costs:
The company expects an annual need for 5,000 switches. If the company makes the product, it will have to
utilize factory space currently being leased for $1,500 a month. Assume the company will need a
supervisor to oversee production of the switches. Ignore qualitative considerations. If the company decides
to make the parts, the total relevant costs will be
None of the costs are relevant.
5. During its first year of operations, the Jones company paid $3,000 for direct materials and $7,500 for
production workers' wages. Lease payments and utilities on the production facilities amounted to $5,500
while general, selling, and administrative expenses totaled $2,000. The company produced 5,000 units and
sold 4,000 units at a price of $8.50 a unit. What is the amount of gross margin for the first year?
None of the above.
6. Pomeranz Company produces a product that has a selling price of $12.00 and a variable cost of $6.00 per
unit. The company's fixed costs are $120,000. What is the breakeven point in sales dollars?
None of the above