$*2$ Parts$*$

Tech Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Tech Systems the switch for $$19\mathrm{.}50$ per unit. None of Tech

Systems' fixed costs are avoidable.

View the outsourcing decision.

Tech Systems needs $85,000$ optical switches. By outsourcing them, Tech Systems can use its idle facilities to manufacture another product that will contribute $$218,000$ to

operating income.

Read the requirements.

Requirement $1.$ Identify the expected net costs that Tech Systems will incur to acquire $85,000$ switches under three alternative plans.

Outsourcing Decision

Requirements

Identify the expected net costs that Tech Systems will incur to acquire $85,000$ switches

under three alternative plans: make the switches, buy the switches and leave facilities idle,

buy the switches and use the idle facilities to make another product.

Which plan makes the best use of Tech Systems' facilities? Support your answer.