Direct materials Direct labor 560,000 105,000 70,000 455,000 Variable MOH Fixed MOH $ 1,190,000 Total manufacturing cost for 70,000 units (Click the icon to view the outsourcing decision analysis.) 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: (Click the icon to view the manufacturing costs.) Another company has offered to sell InteliSystems the switch for $8.50 per unit. If InteliSystems buys the switch from the outside supplier, none of the fixed costs are avoidable. The company prepared an outsourcing decision analysis to show the cost per unit of making the switches versus the cost per unit of buying (outsourcing) the switches. InteliSystems needs 79,000 optical switches next year (assume same relevant range). By outsourcing them, InteliSystems can use its idle facilities to manufacture another product that will contribute $140,000 to operating income, but none of the fixed costs will be avoidable. Should InteliSystems make or buy the switches? Show your analysis. InteliSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials 8.00 $ 1.50 0.00 $ 0.00 Direct labor Variable overhead 1.00 0.00 0.00 8.50 8.00 1.50 1.00 (8.50) 2.00 Purchase price from outsider 10.50 $ $ 8.50 $ Variable cost per unit Complete the Best Use of Facilities Analysis. (Enter a "0" for any zero amounts.) InteliSystems Best Use of Facilities Analysis Buy and Use Facilities for Other Make Product Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches InteliSystems Incremental Analysis for Outsourcing Decision Make Unit Buy Unit Difference Variable cost per unit: Direct materials $ 0.00 $ 8.00 $ 1.50 0.00 Direct labor Variable overhead Purchase price from outsider 8.00 1.50 1.00 (8.50) 1.00 0.00 8.50 0.00 10.50 $ 8.50 $ 2.00 Variable cost per unit