Refer to E8-44B. Tech Systems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, Tech Systems can use its idle facilities to manufacture another product that will contribute $220,000 to operating income, but none of the fixed costs will be avoidable. Should Tech Systems make or buy the switches? Show your analysis.
In E8-44B
Direct materials......................................................$781,000
Direct labor..............................................................142,000
Variable MOH.........................................................213,000
Fixed MOH.............................................................390,500
Total manufacturing cost for 71,000 units.........$1,526,500