Horngren's Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText, Access Card Package
Horngren's Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText, Access Card Package
11th Edition
ISBN: 9780134078946
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 25, Problem E25.18E

Making outsourcing decisions
Eclipse Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit:

Direct Materials		$ 11.00
Direct Labor			4.50
Variable Overhead		6.00
Fixed Overhead			8.00 
Manufacturing Product Cost	$ 29.50

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.

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On 10/6/2024, company A sells goods to Customer C for €20,000 with an agreed credit of two months. On 31/12/2024, in the context of investigating the collectability of its receivables, the company estimates that it will only collect €10,000 from customer C and forms a provision for doubtful debts for the remaining amount. Finally, on 30/3/2025, company A receives from customer C the amount of: a. €9,000 b. €11,000. You are requested to comment on the impact of the above collection cases a. 9000 b. 11,000 on the income statement for fiscal year 2025, justifying your position.
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Horngren's Accounting, Student Value Edition Plus MyAccountingLab with Pearson eText, Access Card Package

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