2. Suppose k ut retuses to devote more ea vidual product. Under this condition,

Question

2. Suppose k ut retuses to devote more ea vidual product. Under this condition, how many linear feet of each drink should Max's stock? How many units of each product will be available for sale each day? Learning Objective 4 E25-18 Making outsourcing decisions Cool Systems manufactures an optical switch that it uses in its final product. The switch has the following manufacturing costs per unit: Differential cost $(1.00) Direct materials Direct labor Variable overhead Fixed overhead Manufacturing product cost 21.00 $ 5.00 3.00 6.00 7.00 Another company has offered to sell Cool Systems the switch for $15.00 per unit. If Cool Systems buys the switch from the outside supplier, the idle manufacturing facili- ties cannot be used for any other purpose, yet none of the fixed costs are avoidable. Prepare an outsourcing analysis to determine whether Cool Systems should make or buy the switch.

Explanation / Answer

Prepare outsourcing analysis

Company should make the product.

Make Buy Direct material 5 Direct labour 3 Variable overhead 6 Purchase cost 15 Total 14 15

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