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iPad 10:21 AM 88% D chrome for Mobil × ' D chrome for Mobil × ' D Chrome for Mobil ×Course Material f × Grano, D C httpsviewer.gcu.edu/PMHO9W 109 % 508 of 778 Suppose jocis bech Ht rerues to devote more than b lncar feet to any nd vidual product. Under this condition, how many linear feet of each drink should Joel's stock? How many units of each product will be available for sale each day? Learning objective 4 E25-18 Making outsourcing decisions Eclipse Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing Differential cost $1.50 costs per unit Direct Materials Direct Labor Variable Overhead Fixed Overhead Manufacturing Product Cost $ 11.00 4.50 6.00 8.00 Another company has offered to sell Eclipse Systems the switch for $20.00 per unit. If Eclipse 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 Prepare an outsourcing analysis to determine whether Eclipse Systems should make or buy the switch Homgren's Accounting: The Managenial Chapters, Eleventh Edtion, by Tracie L Miller Nobles, Brenda L. Mattison, and Ela Mae Matsumura. Published by Prentice Hal. Copyright © 2016 by Pearson Education, Inc.Explanation / Answer
Make or buy Analysis:
Make
Buy
Differential Cost
Direct Material
$ 11.00
$ 11.00
Direct Labor
$ 4.50
$ 4.50
Variable Overhead
$ 6.00
$ 6.00
Fixed Overhead
$ 8.00
$ 8.00
$ -
Cost of Buying
$ 20.00
$ (20.00)
Total Cost
$ 29.50
$ 28.00
$ 1.50
The Buy option will save cost of $1.50, hence buy option is better.
Make or buy Analysis:
Make
Buy
Differential Cost
Direct Material
$ 11.00
$ 11.00
Direct Labor
$ 4.50
$ 4.50
Variable Overhead
$ 6.00
$ 6.00
Fixed Overhead
$ 8.00
$ 8.00
$ -
Cost of Buying
$ 20.00
$ (20.00)
Total Cost
$ 29.50
$ 28.00
$ 1.50
The Buy option will save cost of $1.50, hence buy option is better.
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