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Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart 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 Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?

Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart 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 Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart 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 Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?
Transcribed Image Text:Exercise 6-13A (Algo) Outsourcing decision affected by opportunity costs LO 6-3 Stuart Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,000 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs $ 7,000 6,600 3,800 7,500 28,200 *One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Stuart for $2.80 each. Required a. Calculate the total relevant cost. Should Stuart continue to make the containers? b. Stuart 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 Stuart continue to make the containers? a. Total relevant cost a. Should Stuart continue to make the containers? b. Total avoidable cost b. Should Stuart continue to make the containers?
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