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Requirement 2:

1. make the optical switches, outsource the optical switches and leave the facilities idle, outsource the optical switches and use the facilities to manufacture other product

2. cost to make new product, differential unit cost of obtaining the optical switches, expected net cost of obtaining the optical switches

3. accountability or quality

4. certainty of on-time deliveries or decision of outsourcing employees

5. certainty of future prices matching the quoted price or employee morale

0 Data Table Make Outsource optical switch optical switch Difference (Make-Outsource) Variable costs: Direct materials Direct labor Variable overhead 8.00 3.00 7.00 8.00 3.00 7.00 (19.50) (1.50) Purchase price from outsider 19.50 18.00 $ 19.50 $ Differential cost per unit Eyescape Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Eyescape Systems the switch for $19.50 per unit. None of Eyescape's fixed costs are avoidable. (Click the icon to view the outsourcing decision.) Eyescape Systems needs 80,000 optical switches. By outsourcing them, Eyescape Systems can use its idle facilities to manufacture another product that will contribute $217,000 to operating income. Read the requirements. Requirement 1. Identify the expected net costs that Eyescape Systems will incur to acquire 80,000 switches under three alternative plans. Outsource switches Facilities Idle Make new product Switch costs Make Variable costs: Direct materials Direct labor Variable manufacturing overhead Purchase cost Expected profit contribution from the other product Total expected net cost of the optical switches Requirement 2. Which plan makes the best use of Eyescape System's facilities? Support your answer. y because this Eyescape Systems should plan results in the lowest However, Eyescape Systems should also consider qualitative factors such as and