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:

Manufacturing Costs:

Direct Materials $$ $$781,000$

Direct Labor $106,500$

Variable MOH $71,000$

Fixed MOH $497,000$

Total manufacturing cost for $71,000$ units $-$ $$1,455,500$

RootSystems does not yet know how many switches it will need this year; however, another company has offered to sell RootSystems the switch for $$11\mathrm{.}50$ 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.

Requirements $$

Given the same cost structure, should RootSystems make or buy the switch? Show your analysis.

Now, assume that RootSystems can avoid $$105,000$ 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?

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

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.$)$