WorldSystems manufactures an optical switch that it uses in its final product. WorldSystems incurred the WorldSystems does not yet know how many switches it will need this year; however, another company has following manufacturing costs when it produced 71,000 units last year: offered to sell WorldSystems the switch for $17.00 per unit. If WorldSystems 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 (Click the icon to view the manufacturing costs.) Read the requirements. Total variable cost per unit Decision: Make the optical switch because 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 WorldSystems can avoid $95,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, WorldSystems needs 76,000 switches a year rather than 71,000 switches. What should the company do now? Complete an outsourcing decision analysis assuming fixed costs can be avoided by outsourcing production and the number of units needed have increased. WorldSystems Data Table Outsourcing Decision Make Buy switches switches Units needed Variable cost per unit Total variable costs Fixed costs Total relevant costs 76,000 8.51 684,000 Direct materials Direct labor Variable MOH Fixed MOH Total manufacturing cost for 71,000 units $639,000 142,000 213,000 390,500 $1,384,500 76,000 17 95,000 Print Done Choose from any list or enter any number in the input fields and then click Check