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10.52 Outsource computations, qualitative factors Soft Pearl Company incurred the following costs to produce 50 000 light switches for floor lamps in 2020. Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs $ 200 000 300 000 160 000 240 000 $900 000 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, Soft Pearl Company would eliminate $40 000 of fixed costs and could use the released production capacity to generate additional income of $112 000 from producing a different product. 1. From a financial perspective, should the light switches be outsourced? Show calculations. 2. What qualitative factors need to be considered in the outsourcing decision? Group work or breakout rooms

10.52 Outsource computations, qualitative factors Soft Pearl Company incurred the following costs to produce 50000 light switches for floor lamps in 2020. 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, Soft Pearl Company would eliminate $40000 of fixed costs and could use the released production capacity to generate additional income of $112000 from producing a different product. 1. From a financial perspective, should the light switches be outsourced? Show calculations. 2. What qualitative factors need to be considered in the outsourcing decision? Group work or breakout rooms 10.52 Outsource computations, qualitative factors Soft Pearl Company incurred the following costs to produce 50000 light switches for floor lamps in 2020. 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, Soft Pearl Company would eliminate $40000 of fixed costs and could use the released production capacity to generate additional income of $112000 from producing a different product. 1. From a financial perspective, should the light switches be outsourced? Show calculations. 2. What qualitative factors need to be considered in the outsourcing decision? Group work or breakout rooms

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