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TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produced 73,000 units last
TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produced 73,000 units last year (Click the icon to view the manufacturing costs.) Another company has offered to sell TechSystems the switch for $14.50 per unit. If TechSystems buys the switch from the outside supplier, none of the fixed costs are 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 (Click the icon to view the outsourcing decision analysis) TechSystems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, TechSystems can use its ide facilities to manufacture another product that will contribute $100,000 operating income, but none of the fixed costs will be avoidable Should TechSystems make or buy the switches? Show your analysis. Data table - X Complete the Best Use of Facilities Analysis (Enter a "0" for any zero amounts) TechSystems Best Use of Facilities Analysis Total variable cost of obtaining the optical switches Expected net cost of obtaining the optical switches Decision Buy and Use Facilities for Other Make Product 1 Direct materials 2 Direct labor Variable MOH B 657,000 73,000 219,000 511,000 4 Fixed MOH Total manufacturing cost for 73,000 units S 1,400,000 Data table TechSystems Incremental Analysis for Outsourcing Decision Make Unit Buy Unit Difference Variable cost per unit Deed ma $ 900 $ 0.00 $ 0.00 Oect labor 1.00 0.00 1.00 Variable overhead 200 000 300 000 Purchase price hom outsider 14.50 114.00 13.00 $ 14.30 S (150) Variable cost per un
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