Homework: Chapter 8 Homework (Sp 22) BestSystems manufactures an optical switch that it uses in its final product. BestSystems incurred the following manufacturing costs when it produced 68,000 units last year: (Click the icon to view the manufacturing costs.) Read the requirements. BestSystems does not yet know how many switches it will need this year; however, another company has offered to sell BestSystems the switch for $9.50 per unit. If BestSystems 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. Requirement 1. Given the same cost structure, should BestSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether BestSystems 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 cost to buy exceeds the cost to make.) BestSystems Incremental Analysis for Outsourcing Decision Requirements Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Total variable cost per unit Make Buy Unit Unit Difference 1. Given the same cost structure, should BestSystems make or buy the switch? Show your analysis. 2. Now, assume that BestSystems can avoid $106,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing. BestSystems 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 BestSystems would be willing to pay to outsource the switches? ? itc Data table 1 Direct materials 2 Direct labor 3 Variable MOH 4 Fixed MOH - A B 544,000 In or 136,000 68,000 476,000 $ 1,224,000 5 Total manufacturing cost for 68,000 units Print Done