E8-44B (similar to) Question Help O CoolSystems manufactures an optical switch that it uses in its final product. CoolSystems incurred the following manufacturing costs when it produced 67,000 units last year: B. (Click the icon to view the manufacturing costs.) CoolSystems does not yet know how many switches it will need this year; however, another company has offered to sell CoolSystems the switch for $11.50 per unit. If CoolSystems 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. Read the requirements. Requirement 1. Given the same cost structure, should CoolSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether CoolSystems should make or buy the switch. (Enter a "O" for any zero amounts. Round amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) Data Table CoolSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Variable cost per unit: Difference A B $ 1 Direct materials 2 Direct labor 3 Variable MOH 737,000 134,000 67,000 4 Fixed MOH 368,500 $ 5 Total manufacturing cost for 67,000 units 1,306,500 Total variable cost per unit Print Done i X Requirements 1. Given the same cost structure, should CoolSystems make or buy the switch? Show your analysis. 2. Now, assume that CoolSystems can avoid $100,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, CoolSystems needs 72,000 switches a year rather than 67,000 switches. What should the company do now? 3. Given the last scenario, what is the most CoolSystems would be willing to pay to outsource the switches? Print Done