Question

Question 7: Laser Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Laser Systems the switch for $16.00 per unit. None of Laser's fixed costs are avoidable Make Outsource Difference optical switch optical switch (make-outsource) Variable costs Direct materials 11.00 11.00 2.50 Direct labor 2.50 Variable overhead 5.00 5.00 16.00 $ (16.00) Purchase price from outsider $ 18.50 $ 16.00 S 2.50 Differential cost per unit Laser Systems needs 82,000 optical switches. By outsourcing them, Laser Systems can use its idle facilities to manufacture another product that will contribute $221,000 to operating income. Requirements Identify the expected net costs that Laser Systems will incur to acquire 82,000 switches under three alternative plans 1. 2. Which plan makes the best use of Laser System's facilities? Support your answer.

Answer 1

Answer makse facilities idle make new Peroduct $9.90 Particulars Direct materials Disut labay variable m.fg overheads I purchase cost Expected profit condibertion from the other proderet cost per unit Humit___ ---- 916 1 24 000 $18.50 82,000 82,000 $1,517,000 $1,312,000 Total cost folle capacity conhibition $221,000 To bol sxpecten.net cast of the optical switcby $1,517,000 $1,091,000 => 18:50 *82,000 = 1,517,000 16 X 82.000 = 1,312,000 == 1,312,000-321,000 = 1,091,000 Net cast will be less if company outsource the product and prepare another produet.

2 The best facility is to purchase. switchey from Ou lside suppliers and make new product.