GlobalSystems manufactures an optical switch that it uses in its final product. Global Systems 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 GlobalSystems the switch for $10.00 per unit. If GlobalSystems 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 chos Data Table Data Table (Click the icon to view the outsourcing decision analysis.) GlobalSystems needs 82,000 optical switches next year (assume same relevant range). By outsourcing them, GlobalSystems can use its idle facilities to manufacture another product that will contribute $218,000 to operating income, but none of the fixed costs will be avoidable. Should GlobalSystems make or buy the switches? Show your analysis - X $ 576,000 Direct materials 72.000 216,000 504,000 Direct labor Global Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable MOH Fixed MOH $ 1,368,000 0.00 $ 8.00 S Total manufacturing cost for 72.000 units Variable cost per unit Direct materials Direct labor Variable overhead 8.00 $ 1.00 1.00 3.00 (10.00) 0.00 0.00 10.00 3.00 0.00 Print Done Purchase price from outsider 2.00 12.00 S 10.00 S Check Answer Variable cost per unit 433 PM GlobalSystems manufactures an optical switch that it uses in its final product. Global Systems 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 GlobalSystems the switch for $10.00 per unit. If GlobalSystems 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 (Click the icon to view the outsourcing decision analysis.) GlobalSystems needs 82,000 optical switches next year (assume same relevant range). By outsourcing them, GlobalSystems can use its idle facilities to manufacture another product that will contribute 5218,000 to operating income, but none of the fixed costs will be avoidable. Should GlobalSystems make or buy the switches? Show your analysis Best Use of Facilities Analysis Buy and Use Facilities for Other Product Make X Variable unit cost of obtaining the optical switches Number of optical switches Total variable cost of obtaining the optical switches Expected profit contribution from the other product Expected net cost of obtaining the optical switches
