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RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 69,000 units last year: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $10.50 per unit. If RootSystems buys the switch from the outside supplier, none of the fixed costs are avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) Root Systems Best Use of Facilities Analysis Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Data table A 1 Direct materials 2 Direct labor 3 Variable MOH 4 Fixed MOH 5 Total manufacturing cost for 69,000 units x Make $ $ B 690,000 69,000 138,000 483,000 1,380,000 Buy and Use Facilities for Other Product X Data table *** (Click the icon to view the outsourcing decision analysis.) RootSystems needs 83,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $210,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. RootSystems Incremental Analysis for Outsourcing Decision Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Variable cost per unit $ $ Make Unit Print 10.00 $ 1.00 2.00 0.00 13.00 $ Buy Unit Done 0.00 $ 0.00 0.00 10.50 10.50 $ Difference 10.00 1.00 2.00 (10.50) 2.50 Clear all Check answer

RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 69,000 units last year: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $10.50 per unit. If RootSystems buys the switch from the outside supplier, none of the fixed costs are avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) Root Systems Best Use of Facilities Analysis Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Data table A 1 Direct materials 2 Direct labor 3 Variable MOH 4 Fixed MOH 5 Total manufacturing cost for 69,000 units x Make $ $ B 690,000 69,000 138,000 483,000 1,380,000 Buy and Use Facilities for Other Product X Data table *** (Click the icon to view the outsourcing decision analysis.) RootSystems needs 83,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $210,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. RootSystems Incremental Analysis for Outsourcing Decision Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Variable cost per unit $ $ Make Unit Print 10.00 $ 1.00 2.00 0.00 13.00 $ Buy Unit Done 0.00 $ 0.00 0.00 10.50 10.50 $ Difference 10.00 1.00 2.00 (10.50) 2.50 Clear all Check answer

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 69,000 units last year: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $10.50 per unit. If RootSystems buys the switch from the outside supplier, none of the fixed costs are avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) RootSystems Best Use of Facilities Analysis Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Data table A 1 Direct materials 2 Direct labor 3 Variable MOH 4 Fixed MOH 5 Total manufacturing cost for 69,000 units Print Done X Make $ $ B 690,000 69,000 138,000 483,000 1,380,000 Buy and Use Facilities for Other Product X Data table (Click the icon to view the outsourcing decision analysis.) RootSystems needs 83,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $210,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. RootSystems Incremental Analysis for Outsourcing Decision Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Variable cost per unit $ $ Print Make Unit 10.00 $ 1.00 2.00 0.00 13.00 $ Buy Unit Done 0.00 $ 0.00 0.00 10.50 10.50 $ Difference - X 10.00 1.00 2.00 (10.50) 2.50 Clear all Check answer
Transcribed Image Text:RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 69,000 units last year: (Click the icon to view the manufacturing costs.) Another company has offered to sell RootSystems the switch for $10.50 per unit. If RootSystems buys the switch from the outside supplier, none of the fixed costs are avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) RootSystems Best Use of Facilities Analysis Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Data table A 1 Direct materials 2 Direct labor 3 Variable MOH 4 Fixed MOH 5 Total manufacturing cost for 69,000 units Print Done X Make $ $ B 690,000 69,000 138,000 483,000 1,380,000 Buy and Use Facilities for Other Product X Data table (Click the icon to view the outsourcing decision analysis.) RootSystems needs 83,000 optical switches next year (assume same relevant range). By outsourcing them, RootSystems can use its idle facilities to manufacture another product that will contribute $210,000 to operating income, but none of the fixed costs will be avoidable. Should RootSystems make or buy the switches? Show your analysis. RootSystems Incremental Analysis for Outsourcing Decision Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Variable cost per unit $ $ Print Make Unit 10.00 $ 1.00 2.00 0.00 13.00 $ Buy Unit Done 0.00 $ 0.00 0.00 10.50 10.50 $ Difference - X 10.00 1.00 2.00 (10.50) 2.50 Clear all Check answer
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