5. TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produoed 68,000 units last year: TechSystems does not yet know how many switches it will need this year, however, another company has offered to sell TechSystems the switch for $18.00 per unit. If TechSystems 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 Click the icon to view the manufacturing costs.) Read the requirements Requirement 1. Given the same cost structure, shld TechSystems make or buy the switch? Show your analysis. mplete an incremental analysis to show whether Techsystems 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 co buy exceeds the cost to make.) TechSystems Incremental Analysis for Outsourcing Decision Make Unlt Buy Unlt DIfference Variable cost per unit Total variable cost per unit Decisin: (5) because the variable cost per unit to make the switch is (6) than the variable cost perunit to buy the switch. Requirement 2. Now, assume that TechSystems can avoid $97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing TechSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? Complete an outsourcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. TechSystems Outsourcing Decision Make Buy switches switches 8) Print Total relevant costs Decision: (11) Requirement 3. Given the last scanario, what is the most TechSystems would be willing to pay to outsource the switches? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. because the total relevant costs to make the switches are (12) than the total relevant cosis to buy the switches. Cost if making switches 13) Cost if outsourcing switches Using the basic formula you determined above, solve for the outsourcing cost at which TechSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) TechSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is (15) 1: Data Table per switch. Direct materials Direct labor Variable MOH Fixed MOH Total manufacturing cost for 68,000 units S 748,000 68,000 204,000 374,000 S 1,394.000 2: Requirements 1. Given the same cost structure, should TechSystems make or buy the switch? Show your analysis. 2. Now, assume that TechSystems can avoid S97,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, TechSystems needs 73,000 switches a year rather than 68,000 switches. What should the company do now? 3. Given the last scenario, what is the most TechSystems would be willing to pay to outsource the switches? (2) O Purchase price from outsider ( O Purchase price from outsider Purchase price from outsider ODirect labor Sales price O Direct materials Variable overhead O Fixed overhead O Direct laborO Sales price O Direct materials Variable overhead O Fixed overhead ODirect labo Sales price O Direct materials Variable overhead O Fixed overhead (4) O O Purchase price from outsider (5) O Make the optical switch ) less O greater (7) O Total variable costs O Units needed O Variable cost per unit (6) O Direct labor O Sales price O Direct materials Variable overhead O Fixed overhead O Buy the optical switch O Contribution margin per unit O Fixed costs O Fixed cost per unit (8) O O Total variable costs OUnits needed O Variable cost per unit (9) O O Total variable costs 10) O Total variable costs O Units needed O Variable cost per unit O Contribution margin per unit O Fixed costs O Fixed cost per unit O Contribution margin per unit O Fixed costs O Fixed cost per unit O Contribution margin per unit O Fixed costs O Fixed cost per unit O Variable cost per unit (11) O Buy the optical switch (12) O less (13) O o Sales revenue-Total costs O Sales revenue - Variable costs O Make the optical switch O greater O Direct materialsDirect labor O Direct materials Direct laborVariable costs O Variable costs O Sales revenue Fixed costs Fixed costs (14) O O Sales revenue Total costs O Sales revenue - Variable costs (15) O O equal O greater than O less than O Direct materials Direct labor O Direct materials Direct laborVariable costs O Sales revenue Fixed costs Variable costsFixed costs