Make-or-buy with alternative use of facilities (Learning Objective 6)

Refer to E8-24. Fiber Systems needs 80,000 optical switches next year (assume same relevant range). By outsourcing them, Fiber Systems can use its idle facilities to manu¬ facture another product that will contribute $220,000 to operating income, but none of the fixed costs will be avoidable. Should Fiber Systems make or buy the switches? Show your analysis.