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Laser Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Laser Systems the Laser Systems needs
Laser Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Laser Systems the Laser Systems needs 81,000 optical switches. By outsourcing them, Laser Systems can use its idle facilities to manufacture another switch for $12.50 per unit. None of Laser's fixed costs are avoidable. product that will contribute $224,000 to operating income Read the requirements (Click the icon to view the outsourcing decision.) Roquirement 1. Idently the expected net costs that Laser Systems will incur to acquire 81,000 switches under three alternative plans. Data Table Outsource switches Facilities Make now Switch costs Make ldle product Make Difference Variable costs optical switch optical switch (Make-Outsource) Direct materials Direct labor Variable manufacturing overhead Variable costs: Direct materials Direct labor Variable overhead 7.00 1.00 3.00 7.00 1.00 3.00 (12.50) Purchase cost Expected profit contribution from the other product Total expected net cost of the optical switches 12.50 Purchase price from outsider 11.00 S 12.50 $ Differential cost per unit Print Done
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