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CoolSystems manufactures an optical switch that it uses in its final product. CoolSystems incurred the following manufacturing costs when it produced 68,000 units last year: CoolSystems does not yet know how many switches it will need this year; however, another company has offered to sell CoolSystems the switch for $16.00 per unit. If CoolSystems buys EE (Click the icon to view the manufacturing costs.) 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. X Data table Requirement 1. Given the same cost structure, should CoolSystems make or buy the switch? Show your analysis Complete an incremental analysis to show whether CoolSystems should make or buy the switch. (Enter a "0" 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.) A B Cool Systems 1 Direct materials S 748,000 Incremental Analysis for Outsourcing Decision 2 Direct labor 102,000 Make Buy 3 Variable MOH 136,000 Unit Unit Difference 4 Fixed MOH 142,000 Variable cost per unit: 5 Total manufacturing cost for 68,000 units S 1,428,000 Direct materials 11.00 $ 0.00 $ 11.00 Direct labor 1.50 0.00 1.50 Variable overhead 2.00 0.00 2.00 Purchase price from outsider 0.00 16.00 (16.00) Print Done Total variable cost per unit 14.50 16.00 (1.50) 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 CoolSystems can avoid $110,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, CoolSystems 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. Cool Systems Outsourcing Decision X Make Buy Requirements switches switches Variable cost per unit 14.50 $ 16.00 1. Given the same cost structure, should CoolSystems make or buy the switch? Units needed 73,000 73,000 Show your analysis. , 168,000 2. Now, assume that CoolSystems can avoid $110,000 of fixed costs a year by Total variable costs 1,058,500 outsourcing production. In addition, because sales are increasing, Fixed costs 442,000 332,000 CoolSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? Total relevant costs 1,500,500 $ 1,500,000 3. Given the last scenario, what is the most CoolSystems would be willing to pay to outsource the switches? Decision: Buy the optical switch because the total relevant costs to make the switches are greater than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most CoolSystems 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. Print Done Cost if making switches Cost if outsourcing switches Variable costs + Fixed costs Variable costs + Fixed costs Using the basic formula you determined above, solve for the outsourcing cost at which CoolSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) CoolSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ 16.01 per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is less than $ 16.01 per switch.FiberSystems manufactures an optical switch that it uses in its final product. FiberSystems incurred the following manufacturing costs when it produced 74,000 units last year: FiberSystems does not yet know how many switches it will need this year; however, another company has offered to sell FiberSystems the switch for $9.50 per unit. If FiberSystems buys (Click the icon to view the manufacturing costs.) 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 FiberSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether FiberSystems should make or buy the switch. (Enter a "0" 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.) Fiber Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: - X Requirements Total variable cost per unit 1. Given the same cost structure, should FiberSystems make or buy the switch? - X Show your analysis. Data table 2. Now, assume that FiberSystems can avoid $108,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, FiberSystems needs 79,000 switches a year rather than 74,000 switches. What should the company do now? A B 3. Given the last scenario, what is the most FiberSystems would be willing to pay 1 Direct materials S 592,000 to outsource the switches? 2 Direct labor 185,000 3 Variable MOH 74,000 4 Fixed MOH $18,000 Print Done Total manufacturing cost for 74,000 units S 1,369,000 Print Done