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RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 6 8 , 0
RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced units last year: Manufacturing costs Requirements
Given the same cost structure, should RootSystems make or buy the switch?
Show your analysis.
Now, assume that RootSystems can avoid $ of fixed costs a year by
outsourcing production. In addition, because sales are increasing,
RootSystems needs switches a year rather than switches. What
should the company do now?
Given the last scenario, what is the most RootSystems would be willing to pay
to outsource the switches?
View the manufacturingcosts.
RootSystems does not yet know how many switches it will need this year; however, another company has offered to sell RootSystems the switch for $ per unit. If
RootSystems buys the switch from the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose; yet none of the fixed costs are
avoidable.
Read the requirements.
Requirement Given the same cost structure, should RootSystems make or buy the switch? Show your analysis.
Complete an incremental analysis to show whether RootSystems should make or buy the switch. Enter a for any zero amounts. Round amounts to the nearest cent. Use a
minus sign or parentheses when the cost to buy exceeds the cost to make.
RootSystems
Incremental Analysis for Outsourcing Decision
Variable cost per unit:
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