BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following...
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BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following manufacturing costs when it produced 72,000 units last year: E (Click the icon to view the outsourcing decision analysis.) E (Click the icon to view the manufacturing costs.) BestSystems needs 81,000 optical switches next year (assume same relevant range). By outsourcing them, BestSystems can use its idle facilities to manufacture another product that Another company has offered to sell BestSystems the switch for $11.50 per unit. If BestSystems buys the switch from the outside supplier, none of the fixed costs are avoidable will contribute $220,000 to operating income, but none of the fixed costs will be avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Should BestSystems make or buy the switches? Show your analysis. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) BestSystems Data Table Best Use of Facilities Analysis Buy and Use Direct materials $ 720,000 Facilities for Other Direct labor 144.000 Make Product Variable MOH 216.000 432,000 Fixed MOH $ 1,512,000 Total variable cost of obtaining the optical switches Total manufacturing cost for 72,000 units Print Done Expected net cost of obtaining the optical switches Data Table BestSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials 2$ 10.00 $ 0.00 $ 10.00 Direct labor 2.00 0.00 2.00 Variable overhead 3.00 0.00 3.00 0.00 11.50 (11.50) Purchase price from outsider $ 15.00 $ 11.50 $ 3.50 Variable cost per unit BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following manufacturing costs when it produced 72,000 units last year: E (Click the icon to view the outsourcing decision analysis.) E (Click the icon to view the manufacturing costs.) BestSystems needs 81,000 optical switches next year (assume same relevant range). By outsourcing them, BestSystems can use its idle facilities to manufacture another product that Another company has offered to sell BestSystems the switch for $11.50 per unit. If BestSystems buys the switch from the outside supplier, none of the fixed costs are avoidable will contribute $220,000 to operating income, but none of the fixed costs will be avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Should BestSystems make or buy the switches? Show your analysis. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) BestSystems Data Table Best Use of Facilities Analysis Buy and Use Direct materials $ 720,000 Facilities for Other Direct labor 144.000 Make Product Variable MOH 216.000 432,000 Fixed MOH $ 1,512,000 Total variable cost of obtaining the optical switches Total manufacturing cost for 72,000 units Print Done Expected net cost of obtaining the optical switches Data Table BestSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials 2$ 10.00 $ 0.00 $ 10.00 Direct labor 2.00 0.00 2.00 Variable overhead 3.00 0.00 3.00 0.00 11.50 (11.50) Purchase price from outsider $ 15.00 $ 11.50 $ 3.50 Variable cost per unit
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