RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the following manufacturing costs when it produced 71,000 units last year: (Click the icon to 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 $14.00 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. 1. Given the same cost structure, should RootSystems make or buy the switch? Show your analysis. 2. Now, assume that RootSystems can avoid $102,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, RootSystems needs 76,000 switches a year rather than 71,000 switches. What should the company do now? 3. Given the last scenario, what is the most RootSystems would be willing to pay to outsource the switches? Direct materials Direct labor 781,000 142,000 213,000 497,000 Variable MOH Fixed MOH 1,633,000 Total manufacturing cost for 71,000 units