Direct materials $ 5.00 Direct labor 3.00 Variable overhead 6.00 Fixed overhead 7.00 Manufacturing product cost $ 21.00
Direct materials $ 5.00 Direct labor 3.00 Variable overhead 6.00 Fixed overhead 7.00 Manufacturing product cost $ 21.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Making outsourcing decisions
Cool Systems manufactures an optical switch that it uses in its final product. The switch has the following
Another company has offered to sell Cool Systems the switch for $15.00 per unit. If Cool 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.</p><p>Prepare an outsourcing analysis to determine whether Cool Systems should make or buy the switch.
Transcribed Image Text:Direct materials
$ 5.00
Direct labor
3.00
Variable overhead
6.00
Fixed overhead
7.00
Manufacturing product cost
$ 21.00
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