Question

Homework: Chapter 8 Homework Save Score: 0 of 1 pt 5 of 7 (6 complete) HW Score: 80%, 8 of 10 pts X E8-28A (similar to) s Question Help GlobalSystems manufactures an optical switch that it uses in its final product. GlobalSystems incurred the following manufacturing costs when it produced 74,000 units last year: (Click the icon to view the manufacturing costs.) GlobalSystems does not yet know how many switches it will need this year; however, another company has offered to sell GlobalSystems the switch for $10.00 per unit. If GlobalSystems 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 GlobalSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether GlobalSystems 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.) GlobalSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Total variable cost per unit Choose from any list or enter any number in the input fields and then click Check Answer. ? parts remaining Clear All Check Answer

Answer 1

In the 1st & the 2nd ques, the company should buy the product as the cost of buying the product is less than the cost of making the product. In the 1st ques, we have not considered the fixed cost as the fixed cost is unavoidable even when we buy the product so it is irrelevant to us for making the decision.

( cperunits Make perunt) Buy çarbo? Difference Bag or — МО 3 て O 10 3 The company the cost y making D Incremental Analysis CB) ). Particulars Direct Materials Direct Labour Variable NOH Purchase price (-10) Total Differential cost 13 10 per unit should buy the optical the optical switch is monet e 13 per unit 2 Benefit from ou sourcing Less price frcumed + fixed cost avoided. = 3 X 79000 + 97000 =) 237000 + 97,000 s Should buy the product as uit cost less. compared to making the product o 3, 34,000 The company

the company M The Most, the com would be to pay Variable switch + fixed cost avoided. 13 x 79000 + 97000 1027000 + 97000 3 11 24000 cost per unit 1124ooo 79000 14:23