C Opti Systems needs 85,000 optical switches. By outsourcing them, Opti Systems can use its idl- facilities to manufacture another product that will contribute $217,000 to operating income. Read the requirements. Data table 4 Make Outsource Difference optical switch optical switch (Make-Outsource) Variable costs: $ 9.00 $ 9.00 Direct materials Direct labor Variable overhead Purchase price from outsider Differential cost per unit $ Print 5.00 4.00 $ 18.00 $ Done 19.50 19.50 $ 5.00 4.00 (19.50) (1.50) I

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Opti Systems manufactures an optical switch that it uses in its final product. Another company has offered
to sell Opti Systems the switch for $19.50 per unit. None of Opti's fixed costs are avoidable.
(Click the icon to view the outsourcing decision.)
Requirement 1. Identify the expected net costs that Opti Systems will incur to acquire 85,000 switches unde
Outsource switches
Facilities
Idle
Switch costs
Make
Variable costs:
Direct materials
Direct labor
Variable manufacturing overhead
Purchase cost
Expected profit contribution from the other
product
Total expected net cost of the optical switches
Make new
product
LO
Opti Systems needs 85,000 optical switches. By outsourcing them, Opti Systems can use its idle
facilities to manufacture another product that will contribute $217,000 to operating income.
Read the requirements.
Data table
4
Make
Outsource
Difference
optical switch optical switch (Make-Outsource)
Variable costs:
$
9.00
$
9.00
5.00
4.00
18.00 $
Direct materials
Direct labor
Variable overhead
Purchase price from outsider
Differential cost per unit
$
Print
$
Done
19.50
19.50 $
insert
prt sc
5.00
4.00
(19.50)
(1.50)
delete
Transcribed Image Text:Opti Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Opti Systems the switch for $19.50 per unit. None of Opti's fixed costs are avoidable. (Click the icon to view the outsourcing decision.) Requirement 1. Identify the expected net costs that Opti Systems will incur to acquire 85,000 switches unde Outsource switches Facilities Idle Switch costs Make Variable costs: Direct materials Direct labor Variable manufacturing overhead Purchase cost Expected profit contribution from the other product Total expected net cost of the optical switches Make new product LO Opti Systems needs 85,000 optical switches. By outsourcing them, Opti Systems can use its idle facilities to manufacture another product that will contribute $217,000 to operating income. Read the requirements. Data table 4 Make Outsource Difference optical switch optical switch (Make-Outsource) Variable costs: $ 9.00 $ 9.00 5.00 4.00 18.00 $ Direct materials Direct labor Variable overhead Purchase price from outsider Differential cost per unit $ Print $ Done 19.50 19.50 $ insert prt sc 5.00 4.00 (19.50) (1.50) delete
Variable costs:
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 Opti System's facilities? Support your answer.
Opti Systems should
However, Opti Systems should also consider qualitative factors such as
2
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E
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4
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5
LL
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7
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because this plan results in the lowest
and
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Transcribed Image Text:Variable costs: 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 Opti System's facilities? Support your answer. Opti Systems should However, Opti Systems should also consider qualitative factors such as 2 S 101 ? tab 16 2 1 7 Q A 2 W S # 3 E D $ 4 % R 5 LL 40 T 6 & G 7 الالالال because this plan results in the lowest and 8 ( 1 9 K ) O O P : { [ ? 1 pause
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