Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: LOADING... (Click the icon to view the costs.) Direct materials $7.00 Direct labor 2.00 Variable overhead 8.00 Fixed overhead 6.50____________________________ Manufacturing product cost $23.50__________________________ _________________________________ LOADING... (Click the icon to view additional information.) Another company has offered to sell Sensor Systems the switch for $19.00 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the switches in-house.) Make Outsource Difference optical switch optical switch (Make—Outsource) Variable costs: Direct materials Direct labor Variable overhead Purchase price from outsider Total differential cost per unit Decision: ▼ buy the optical switch make the optical switch
Sensor Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: LOADING... (Click the icon to view the costs.) Direct materials $7.00 Direct labor 2.00 Variable overhead 8.00 Fixed overhead 6.50____________________________ Manufacturing product cost $23.50__________________________ _________________________________ LOADING... (Click the icon to view additional information.) Another company has offered to sell Sensor Systems the switch for $19.00 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the switches in-house.) Make Outsource Difference optical switch optical switch (Make—Outsource) Variable costs: Direct materials Direct labor Variable overhead Purchase price from outsider Total differential cost per unit Decision: ▼ buy the optical switch make the optical switch
Chapter6: Activity-based, Variable, And Absorption Costing
Section: Chapter Questions
Problem 1MC: Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses...
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Question
Sensor
Systems manufactures an optical switch that it uses in its final product. The switch has the following LOADING...
(ClickDirect materials
$7.00
Direct labor
2.00
Variable overhead
8.00
Fixed overhead
6.50____________________________
Manufacturing product cost
$23.50__________________________
_________________________________
LOADING...
(ClickAnother company has offered to sell Sensor Systems the switch for $19.00 per unit. If Sensor Systems buys the switch from the outside supplier, the idle manufacturing facilities cannot be used for any other purpose, yet none of the fixed costs are avoidable.
Prepare an outsourcing analysis to determine whether Sensor Systems should make or buy the switch. (For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the switches in-house.)
|
Make
|
Outsource
|
Difference
|
---|---|---|---|
|
optical switch
|
optical switch
|
(Make—Outsource)
|
Variable costs:
|
|||
Direct materials
|
|
|
|
Direct labor
|
|
|
|
Variable overhead
|
|
|
|
Purchase price from outsider
|
|
|
|
Total differential cost per unit
|
|
|
|
Decision:
▼
buy the optical switch
make the optical switch
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