Vegeta Systems manufactures an optical switch that it uses in its final product. The switch...
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Accounting
Vegeta Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per? unit
Direct Material
$14.00
Direct Labor
1.00
Variable Overhead
3.00
Fixed Overhead
7.00
Manufacturing Product Cost
$25.00
Another company has offered to sell Fiber Systems the switch for $16.50 per unit. If Fiber 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.
Requirements
Prepare an outsourcing analysis to determine whether Fiber Systems should make or buy the switch. ?(For the Difference? column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the swithces? in-house.)
Make
Outsource
Difference
optical switch
optical switch
(makeoutsource)
Variable costs:
Direct materials
Direct labor
Variable overhead
Purchase price from outsider
Total differential cost per unit
Answer & Explanation
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