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. (Click the icon to view the outsourcing decision.) Laser Systems needs 82,000 optical switches. By outsourcing them, Laser Systems can use its idle facilities to manufacture another product that will contribute $217,000 to operating income. Read the requirements Requirement 1. Identify the expected net costs that Laser Systems will incur to acquire 82,000 switches under three alternative plans. Outsource switches Facilities Switch costs Make Idle Variable costs: Make new product Direct materials Direct labor Variable manufacturing overhead Purchase cost Expected profit contribution from the other product Total expected net cost of the optical switches Requirement 2. Which plan makes the best use of Laser System's facilities? Support your answer. Laser Systems should However, Laser Systems should also consider qualitative factors such as Data table because this plan results in the lowest and Make Outsource Difference optical switch optical switch (Make-Outsource) Variable costs: Direct materials $ 8.00 8.00 Direct labor 3.50 3.50 Variable overhead 3.00 3.00 $ 16.00 Purchase price from outsider (16.00) $ 14.50 $ 16.00 $ Differential cost per unit (1.50)
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. (Click the icon to view the outsourcing decision.) Laser Systems needs 82,000 optical switches. By outsourcing them, Laser Systems can use its idle facilities to manufacture another product that will contribute $217,000 to operating income. Read the requirements Requirement 1. Identify the expected net costs that Laser Systems will incur to acquire 82,000 switches under three alternative plans. Outsource switches Facilities Switch costs Make Idle Variable costs: Make new product Direct materials Direct labor Variable manufacturing overhead Purchase cost Expected profit contribution from the other product Total expected net cost of the optical switches Requirement 2. Which plan makes the best use of Laser System's facilities? Support your answer. Laser Systems should However, Laser Systems should also consider qualitative factors such as Data table because this plan results in the lowest and Make Outsource Difference optical switch optical switch (Make-Outsource) Variable costs: Direct materials $ 8.00 8.00 Direct labor 3.50 3.50 Variable overhead 3.00 3.00 $ 16.00 Purchase price from outsider (16.00) $ 14.50 $ 16.00 $ Differential cost per unit (1.50)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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.
(Click the icon to view the outsourcing decision.)
Laser Systems needs 82,000 optical switches. By outsourcing them, Laser Systems can use its idle facilities to
manufacture another product that will contribute $217,000 to operating income.
Read the requirements
Requirement 1. Identify the expected net costs that Laser Systems will incur to acquire 82,000 switches under three alternative plans.
Outsource switches
Facilities
Switch costs
Make
Idle
Variable costs:
Make new
product
Direct materials
Direct labor
Variable manufacturing overhead
Purchase cost
Expected profit contribution from the other
product
Total expected net cost of the optical switches
Requirement 2. Which plan makes the best use of Laser System's facilities? Support your answer.
Laser Systems should
However, Laser Systems should also consider qualitative factors such as
Data table
because this plan results in the lowest
and
Make
Outsource
Difference
optical switch optical switch (Make-Outsource)
Variable costs:
Direct materials
$
8.00
8.00
Direct labor
3.50
3.50
Variable overhead
3.00
3.00
$
16.00
Purchase price from outsider
(16.00)
$
14.50 $
16.00 $
Differential cost per unit
(1.50)
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