RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 65,000 units last year: BE: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $15.50 per unit. If RootSystems 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. Facilities for Other Make Product 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. Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Direct materials Direct labor Variable MOH Fixed MOH 650,000 65,000 130,000 422,500 0.00 $ Variable cost per unit Direct materials Direct labor Variable overhead 0.00 10.00 $ 1.00 2.00 0.00 10.00 1.00 2.00 (1550) 1.267.500 000 15.50 Total manufacturing cost for 65,000 units Purchase price from outsider 13.00 $ 15.50 5 (2.50) Variable cost per unit Print Done Print Done uys the RootSystems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $100,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. unit of Expected profit contribution from the other product Expected sales price of the other product Fixed unit cost of obtaining the optical switches Variable unit cost of obtaining the optical switches Conribution margin of optical switches Number of optical switches Sales price of optical switches Total variable cost of obtaining the optical switches ield ields Expected profit contribution from the other product Expected sales price of the other product Fixed unit cost of obtaining the optical switches Variable unit cost of obtaining the optical switches RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 65,000 units last year: BE: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $15.50 per unit. If RootSystems 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. Facilities for Other Make Product 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. Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Direct materials Direct labor Variable MOH Fixed MOH 650,000 65,000 130,000 422,500 0.00 $ Variable cost per unit Direct materials Direct labor Variable overhead 0.00 10.00 $ 1.00 2.00 0.00 10.00 1.00 2.00 (1550) 1.267.500 000 15.50 Total manufacturing cost for 65,000 units Purchase price from outsider 13.00 $ 15.50 5 (2.50) Variable cost per unit Print Done Print Done uys the RootSystems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $100,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. unit of Expected profit contribution from the other product Expected sales price of the other product Fixed unit cost of obtaining the optical switches Variable unit cost of obtaining the optical switches Conribution margin of optical switches Number of optical switches Sales price of optical switches Total variable cost of obtaining the optical switches ield ields Expected profit contribution from the other product Expected sales price of the other product Fixed unit cost of obtaining the optical switches Variable unit cost of obtaining the optical switches
