chapter 8 question 5

stion 5, E8-28A (sim... Part 1 of 6 HW Score: 16.67%, 1 of 6 points O Points: 0 of 1 Save GlobalSystems manufactures an optical switch that it uses in its final product. GlobalSystems incurred the following manufacturing costs when it produced 71,000 units last year: Click the icon to view the manufacturing costs.) GlobalSystems does not yet know how many switches it will need this year, however, another company has offered to sell GlobalSystems the switch for $20.00 per unit. If GlobalSystems buys the switch from the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose, yet none of the fixed costs are avoidable Read the requirements Requirement 1. Given the same cost structure, should GlobalSystems make or buy the switch? Show your analysis Complete an incremental analysis to show whether GlobalSystems should make or buy the switch. (Enter a "O" for any zero amounts Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) Global Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Total variable cost per unit 1 1 Requirements - X 1. Given the same cost structure, should GlobalSystems make or buy the switch? Show your analysis 2. Now, assume that GlobalSystems can avoid $95,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing. GlobalSystems needs 76,000 switches a year rather than 71,000 switches What should the company do now? 3. Given the last scenario, what is the most GlobalSystems would be willing to pay to outsource the switches? x Data table A B Direct materials GA 781,000 2 Direct labor 177,500 213,000 426,000 3 Variable MOH 4 Fixed MOH S 1,597,500 5 Total manufacturing cost for 71,000 units Print Done