RootSystems manufactures an optical switch that it uses in its final product. (Click the icon to view the outsourcing decision analysis.) RootSystems incurred the following manufacturing costs when it produced 72,000 units last year: RootSystems needs 83,000 optical switches next year (assume same relevant (Click the icon to view the manufacturing costs.) range). By outsourcing them, RootSystems can use its idle facilities to Another company has offered to sell RootSystems the switch for $16.50 per unit. If manufacture another product that will contribute $110,000 to operating income, RootSystems buys the switch from the outside supplier, none of the fixed costs are the switches? Show your analysis. but none of the fixed costs will be avoidable. Should RootSystems make or buy 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. RootSystems Best Use of Facilities Analysis Buy and Use Facilities for Other Product Make 14.00 83000 Variable unit cost of obtaining the optical switches Number of optical switches 16.50 83000 1162000 1369500 Total variable cost of obtaining the optical switches Expected profit contribution from the other product 01 (110000) 1162000 1259500 Expected net cost of obtaining the optical switches Decision: Make the optical switches Choose from any list or enter any number in the input fields and then continue to the next question. - X Data Table RootSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference 11.00 $ 11.00 Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider 1.00 0.00 $ 0.00 0.00 1.00 2.00 2.00 (16.50) 0.00 16.50 Variable cost per unit 14.00 $ 16.50 $ (2.50) Print Done 1 Data lable S $ Direct materials Direct labor Variable MOH Fixed MOH 792,000 72,000 144,000 468,000 s $ Total manufacturing cost for 72,000 units 1,476,000 Print Done erl