BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following manufacturing BestSystems does not yet know how many switches it will need this year; however, another company has offered to sell costa when it produced 69,000 unita ast year. BestSystems the switch for $11.50 per unit. If BestSystems buys the switch from the cutaide supplier, the manufacturing Click the icon to view the manufacturing costs. facilities that will be idle cannot be used for any other purpose, yet none of the fixed ocsts are avoidable. Read the lens Requirement 1. Given the same cos: structure, should BestSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether BestSystems shouki make or buy the switch. (Enter a 'O' for any zero articunts, Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make BestSystems A Data Table - X Incremental Analysis for Outsourcing Decision Make Buy Unit B Unit Difference A 1 Direct materials $ 621,000 69,000 $ 9.00 2 Direct labor Variable cost per unit: Direct materials Direct labor Variable overhead 9.00 S 1.00 0.00 $ 0.00 1.00 3 Variable MOH 207,000 3.00 0.00 4 Fixed MOH 183,000 3.00 (11.50) 3.00 Purchase price from outalder $ 1.300.000 11.50 11.50 $ 5. Total manufacturing cost for 69,000 units S 13,00 S 1.50 Total variable cost per unit Decision: Buy the optical switch Print Done because the variable cost per unit to make the switch is greater than the variable cosi per unit to buy the switch. Requirement 2. Now, assume that Best Systems can avoid $105,000 of fixed costs a year by cutsourcing production. In addition, because sales are increasing, Best Systems reeds 74,000 switches a year later than 69,00D switches. What should the company do now? Complete an outsourcing ceclelon analyels assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. Variable cosi per unit: Direct materials $ 9.00) C.00 $ 9.00 Direct labor 1.00 0.00 1.00 Variable overhead 3.0) 0.0D 3.00 0.00 Purchase price from outsider 11.50 (11.50) 1.50 $ Total variable coster unit 13.00 S 11.50 $ Decision: Buy the optical switch because the variable cost per unit to make the switch is greater than the variable cost per unit to buy the switch. Requirement 2. Now, assume that Bes:Systems can avoid S105.000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, BestSysterns needs 74.000 switches a year rather than 69.000 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. BestSystems Outsourcing Decision Make Buy switches switches Units needed S 74000.00 $ 74000.00 Variable cusl por un 13 11.5 Total variable costs 962,000 851.000 Fixed costs 483003 13340x20 Total relevant costs Choose from any list or enter any number in the input fields and then click Check
