Score: 0.93 af 1 pt E8-28A (similar to) Question Help RootSystems manufactures an optical switch that it uses in its final product. RootSystems incurred the folowing manufacturing costs when it RootSystems does not yet know how many switches it wil need this year, however, another company has ofered to sell RootSystems the switch producod 68,000 units last year a(Click the loon to view the manufacturing costs.) for $16.00 por nit. If RootSystems buys the switch from the outside supplior, the manufacturing facilitios that will bo idle cannot be used for any other purpose, yet none of the ixed costs are avoidable. Read the reguiroments Requirement 1. Given the same cost structure, should RootSystems make or buy the switch? Show your analysis Complete an incremental analysis o show hother Roo Systems should make or buy the switch. Enter a for any zero an outs. Round amounts o te nearest cont Use a minus s gn or paren ases when he cos to buy exceeds te cos to make. Incremental Analysis for Outsourcing Decision Make Unit Buy Unit Difference Vatiable cost per unt Direct materials Direct labor Variable averhead Purchase price from S 11.00 $ 0.00 S 11.00 1.50 1.00 150 0.00 1.00 Total variable cost per unt 0.0016.00(16.00) S Decision: Make the optical swecause the variable cost per unit to make the switch is less than the variable cost per unit to buy the switch. Requirement 2. Now, assume that RootSystems can avoid S104,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing RootSystems needs 73,000 switches a year rafher than 68,000 switches. What should the company do now Complete an outscurcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. Make switches switches Buy Data Table Variable cost per unit13.50 $ 16.00 Units needed Total variable costs Fixed costs Total relevant costs Decision Make the optical stbrecause the total relevant costs to make the switches are less than the total relevant costs to buy the switches Requirement 3. Givon the last sconario, what is the most RootSystoms would be wiling to pay to outsourco tho switchos? Begin by idonbiying the basic formula that is used to determine the indifHerent outsourcing cost per unit. 73,000 73,000 985,500 1.168.000 442,000 338,000 $1.427,500 $1.506.000 Diroct materials Direct labor Variable MOH Fixed MOH Total manufacturing cost for 68,000 units 02,000 8,000 442,000 51,360,000 Print Done Cost i making switches Variable costs + Fxed costs Variable costs Fixed costs Using the basic fomula you determined above, solve for the outsourcing cost at which RooSystems would be indferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) RootSystems would be indfferent between outsourcing and making the switches f the outsourcing cost was per switch. Therefore, Systems wl only be vwiling to outsource i the outsourcing cost is per switch
