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  3. 10.51 outsource computations, qualitative factors

10.51 Outsource computations, qualitative factors Diamond Light Company incurred the following costs to produce 50...

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10.51 Outsource computations, qualitative factors Diamond Light Company incurred the following costs to produce 50 000 light switches for floor lamps in 2017. Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $100000 150 000 80 000 120000 $450000 The Ignition Company has offered to supply the switches for $8 per unit. An analysis of the overhead costs has identified that if the switches are outsourced, Diamond Light Company would eliminate $20 000 of fixed costs, and could use the released production capacity to generate additional income of S56 000 from producing a different product. Required a. From a financial perspective, should the light switches be outsourced? Show calculations. b. What qualitative factors need to be considered in the outsourcing decision

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