* Need help with requirement 3

Using the basic formula you determined above, solve for the outsourcing cost at which WorldSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.)

WorldSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $				??
per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is	less than	$	???		per switch.

WorldSystems manufactures an optical switch that it uses in its final product. WorldSystems incurred the following manufacturing costs when it produced 68,000 units last year: E (Click the icon to view the manufacturing costs.) WorldSystems does not yet know how many switches it will need this year, however, another company has offered to sell WorldSystems the switch for $15.00 per unit. If WorldSystems buys the switch from the outside supplier, the ma of the fixed costs are avoidable. Read the requirements. variable overnead Purchase price from outsider 1.00 1.00 0.00 0.00 15.00 (15.00) 13.50 15.00 $ (1.50) Total variable cost per unit Decision: Make the optical switch because the variable cost per unit to make the switch is less than the variable cost per unit to buy the switch. Requirement 2. Now, assume that WorldSystems can avoid $97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, WorldSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? Complete an outsourcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. Requirements Variable cost per unit Units needed Total variable costs Fixed costs World Systems Outsourcing Decision Make switches 13.50 $ 73,000 985,500 408,000 $ 1,393,500 $ Buy switches 15.00 73,000 1,095,000 311,000 1,406,000 1. Given the same cost structure, should WorldSystems make or buy the switch? Show your analysis. 2. Now, assume that WorldSystems can avoid $97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, WorldSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? 3. Given the last scenario, what is the most WorldSystems would be willing to pay to outsource the switches? Total relevant costs Print Done Decision: Make the optical switch because the total relevant costs to make the switches are less than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most WorldSystems would be willing to pay to outsource the switches? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. = Cost if making switches Variable costs + Fixed costs Cost if outsourcing switches Variable costs + Fixed costs Direct materials Direct labor Variable MOH 748,000 102,000 68,000 408,000 1,326,000 Using the basic formula you determined above, solve for the outsourcing cost at which WorldSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) Fixed MOH Total manufacturing cost for 68,000 units WorldSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is less than $ per switch. Print Done WorldSystems manufactures an optical switch that it uses in its final product. WorldSystems incurred the following manufacturing costs when it produced 68,000 units last year: E (Click the icon to view the manufacturing costs.) WorldSystems does not yet know how many switches it will need this year, however, another company has offered to sell WorldSystems the switch for $15.00 per unit. If WorldSystems buys the switch from the outside supplier, the ma of the fixed costs are avoidable. Read the requirements. variable overnead Purchase price from outsider 1.00 1.00 0.00 0.00 15.00 (15.00) 13.50 15.00 $ (1.50) Total variable cost per unit Decision: Make the optical switch because the variable cost per unit to make the switch is less than the variable cost per unit to buy the switch. Requirement 2. Now, assume that WorldSystems can avoid $97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, WorldSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? Complete an outsourcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. Requirements Variable cost per unit Units needed Total variable costs Fixed costs World Systems Outsourcing Decision Make switches 13.50 $ 73,000 985,500 408,000 $ 1,393,500 $ Buy switches 15.00 73,000 1,095,000 311,000 1,406,000 1. Given the same cost structure, should WorldSystems make or buy the switch? Show your analysis. 2. Now, assume that WorldSystems can avoid $97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, WorldSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? 3. Given the last scenario, what is the most WorldSystems would be willing to pay to outsource the switches? Total relevant costs Print Done Decision: Make the optical switch because the total relevant costs to make the switches are less than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most WorldSystems would be willing to pay to outsource the switches? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. = Cost if making switches Variable costs + Fixed costs Cost if outsourcing switches Variable costs + Fixed costs Direct materials Direct labor Variable MOH 748,000 102,000 68,000 408,000 1,326,000 Using the basic formula you determined above, solve for the outsourcing cost at which WorldSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) Fixed MOH Total manufacturing cost for 68,000 units WorldSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is less than $ per switch. Print Done