Final answer:
If July Company decides to make the switches internally, the total cost would be $92,500 per year.
Step-by-step explanation:
If July Company decides to make the switches internally, it will incur various costs. The unit-level material cost per switch is $3, unit-level labor cost is $2, and unit-level overhead is $1, bringing the total unit-level cost to $6. Additionally, there is a batch-level set-up cost of $25,000, product-level supervisory salaries of $37,500, and allocated facility-level costs of $20,000. The company would also need to consider the cost of factory space currently being leased at $1,500 per month and hiring an additional supervisor.
To calculate the total costs, we need to consider the projected annual need for 5,000 switches. The total unit-level cost per switch is $6, and multiplying this by the annual need of 5,000 gives us $30,000. Considering the other costs, the total cost of making the switches internally would be $92,500 per year.