Sorry the pictures are all weird. I need help finding how to solve this.
CoolSystems manufactures an optical switch that it uses in its final product. CoolSystems incurred the following manufacturing costs when it produced 68,000 units last year: B (Click the icon to view the manufacturing costs.) CoolSystems does not yet know how many switches it will need this year; however, another company has offered to sell CoolSystems the switch for $15.00 per unit. If CoolSystems 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 1. Given the same cost structure, should CoolSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether CoolSystems should make or buy the switch. (Enter a "0" 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.) CoolSystems Incremental Analysis for Outsourcing Decision Buy Make Unit Unit Difference Variable cost per unit: Total variable cost per unit CoolSystems manufactures an optical switch that it uses in its final product. CoolSystems incurred the following manufacturing costs when it produced 68.000 units last year: (Click the icon to view the manufacturing costs.) CoolSystems does not yet know how many switches it will need this year; however, another company has offered to sell CoolSystems the switch for $15.00 per unit. If CoolSystems 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, Decision: because the variable cost per unit to make the switch is than the variable cost per unit to buy the switch. Requirement 2. Now, assume that CoolSystems can avoid $104,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, CoolSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? Complete an outsourcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. CoolSystems Outsourcing Decision Make Buy switches switches Total relevant mete Total relevant costs Decision: because the total relevant costs to make the switches are | than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most CoolSystems would be willing to pay to outsource the switches? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. Cost if making switches Cost if outsourcing switches Using the basic formula you determined above, solve for the outsourcing cost at which CoolSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) CoolSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is per switch. 1 Data Table - x Direct materials $ Direct labor 680,000 170,000 68,000 408,000 Variable MOH Fixed MOH $ 1,326,000 Total manufacturing cost for 68,000 units
