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  3. vegeta systems manufactures an optical switch that

Vegeta Systems manufactures an optical switch that it uses in its final product. The switch...

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Question

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

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