RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced $68,000$ units last year: Manufacturing costs Requirements

Given the same cost structure, should RootSystems make or buy the switch?

Show your analysis.

Now, assume that RootSystems can avoid $$100,000$ of fixed costs a year by

outsourcing production. In addition, because sales are increasing,

RootSystems needs $73,000$ switches a year rather than $68,000$ switches. What

should the company do now?

Given the last scenario, what is the most RootSystems would be willing to pay

to outsource the switches?

View the manufacturing$\_$costs.

RootSystems does not yet know how many switches it will need this year; however, another company has offered to sell RootSystems the switch for $$9\mathrm{.}00$ per unit. If

RootSystems 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 RootSystems make or buy the switch? Show your analysis.

Complete an incremental analysis to show whether RootSystems 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.$)$

RootSystems

Incremental Analysis for Outsourcing Decision

Variable cost per unit:

$1$