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GlobalSystems manufactures an optical switch that it uses in its final product GlobalSystems incurred the following manufacturing costs when it produced 72,000 units last year
GlobalSystems manufactures an optical switch that it uses in its final product GlobalSystems incurred the following manufacturing costs when it produced 72,000 units last year (Click the icon to view the manufacturing costs) Another company has offered to sell GlobalSysterns the switch for $15.00 per unit GlobalSystems buys the switch from the outside supplier, none of the fored 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 (Cick the icon to view the outsourcing decision analysis.) GlobalSystems needs 79.000 optical switches next year (assume same relevant range) By outsourcing them, Global Systems can use its ide cilities to manufacture another product that will contribute $210,000 to operating income, but none of the fixed costs will be avoidable. Should GlobalSystems make or buy the switches? Show your analysis Complete the Best Use of Facilities Analyse (Enter a *o for any zero amounts) Global Systems 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 Data Table A B 1 Direct materials $ 576,000 2 Direct labor 108,000 3 Variable MOH 216,000 396,000 4 Fixed MOH 5 Total manufacturing cost for 72,000 units $ 1,296,000 Data Table Global Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials $ 8.00 $ 0.00 $ 8.00 Direct labor 1.50 0.00 1.50 Variable overhead 3.00 0.00 0.00 15.00 3.00 (15.00 Purchase price from outsider Variable cost per unit $ 12.50 S 15.00 $ (2.50)
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