InteliSystems manufactures an optical switch that it uses in its final product. InteliSystems incurred t costs when it produced 70,000 units last year: E (Click the icon to view the manufacturing costs.) following manufacturing InteliSystems does not yet know how many switches it will need this year, however, another company has offered to sell InteliSystems the switch for $8.50 per unit. If InteliSystems buys the switch from the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose, yet none of the fixed costs are avoidable. Read the requirements Requirement 1. Given the same cost structure, should InteliSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether InteliSystems should make or buy the switch. (Enter a "0" for any zero amounts. Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) InteliSystems |3 Incremental Analysis for Outsourcing Decision Data table Make Buy Unit Unit Difference B Variable cost per unit: 1 Direct materials 560,000 Direct materials 2 Direct labor 105,000 Direct labor 3 Variable MOH 70,000 Variable overhead 4 Fixed MOH 455,000 Purchase price from outsider 5 Total manufacturing cost for 70,000 units 1,190,000 Total variable cost per unit Print Done
InteliSystems manufactures an optical switch that it uses in its final product. InteliSystems incurred t costs when it produced 70,000 units last year: E (Click the icon to view the manufacturing costs.) following manufacturing InteliSystems does not yet know how many switches it will need this year, however, another company has offered to sell InteliSystems the switch for $8.50 per unit. If InteliSystems buys the switch from the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose, yet none of the fixed costs are avoidable. Read the requirements Requirement 1. Given the same cost structure, should InteliSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether InteliSystems should make or buy the switch. (Enter a "0" for any zero amounts. Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) InteliSystems |3 Incremental Analysis for Outsourcing Decision Data table Make Buy Unit Unit Difference B Variable cost per unit: 1 Direct materials 560,000 Direct materials 2 Direct labor 105,000 Direct labor 3 Variable MOH 70,000 Variable overhead 4 Fixed MOH 455,000 Purchase price from outsider 5 Total manufacturing cost for 70,000 units 1,190,000 Total variable cost per unit Print Done
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 3PB: Cinnamon Depot bakes and sells cinnamon rolls for $1.75 each. The cost of producing 500,000 rolls in...
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Transcribed Image Text:InteliSystems manufactures an optical switch that it uses in its final product. InteliSystems incurred the following manufacturing
costs when it produced 70,000 units last year:
E (Click the icon to view the manufacturing costs.)
InteliSystems does not yet know how many switches it will need this year; however, another company has offered to sell
InteliSystems the switch for $8.50 per unit. If InteliSystems buys the switch from the outside supplier, the manufacturing
facilities that will be idle cannot be used for any other purpose, yet none of the fixed costs are avoidable.
Read the requirements.
Requirement 1. Given the same cost structure, should InteliSystems make or buy the switch? Show your analysis.
Complete an incremental analysis to show whether InteliSystems should make or buy the switch. (Enter a "O" for any zero amounts. Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.)
InteliSystems
Incremental Analysis for Outsourcing Decision
Data table
Make
Buy
Unit
Unit
Difference
А
B
Variable cost per unit:
1 Direct materials
$
560,000
Direct materials
2 Direct labor
105,000
Direct labor
3 Variable MOH
70,000
Variable overhead
4 Fixed MOH
455,000
Purchase price from outsider
5 Total manufacturing cost for 70,000 units
1,190,000
Total variable cost per unit
Print
Done
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