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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 73,000 units last year:
BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following manufacturing costs when it produced 73,000 units last year: (Click the icon to view the manufacturing costs.) Another company has offered to sell BestSystems the switch for $16.50 per unit. If BestSystems buys the switch from the outside supplier, none of the fixed costs are 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. E (Click the icon to view the outsourcing decision analysis.) BestSystems needs 79,000 optical switches next year (assume same relevant range). By outsourcing them, BestSystems can use its idle facilities to manufacture another product that will contribute $130,000 to operating income, but none of the fixed costs will be avoidable. Should BestSystems make or buy the switches? Show your analysis. C... Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) BestSystems Best Use of Facilities Analysis Buy and Use Facilities for Other Product Make Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Choose from any list or enter any number in the input fields and then click Check Answer. Data Table A 1 Direct materials $ 657,000 2 Direct labor 109,500 3 Variable MOH 219,000 4 Fixed MOH 474,500 $ 5 Total manufacturing cost for 73,000 units 1,460,000 BestSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials Direct labor 9.00 $ 0.00 $ 9.00 1.50 0.00 1.50 Variable overhead 3.00 0.00 3.00 0.00 16.50 Purchase price from outsider (16.50) $ 13.50 $ 16.50 $ Variable cost per unit (3.00)
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