InteliSystemsInteliSystems

manufactures an optical switch that it uses in its final product.

InteliSystemsInteliSystems

incurred the following manufacturing costs when it produced

$67$ comma $00067,000$

units last$$ year:

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InteliInteliSystems

does not yet know how many switches it will need this$$ year; however, another company has offered to sell

InteliSystemsInteliSystems

the switch for

$ $10\mathrm{.}00$$$10\mathrm{.}00$

per unit. If

InteliSystemsInteliSystems

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.

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Question content area bottom

Part $1$

Requirement $1.$ Given the same cost$$ structure, should

InteliSystemsInteliSystems

make or buy the$$ switch? Show your analysis.

Complete an incremental analysis to show whether

InteliInteliSystems

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.$)$

InteliSystems

Incremental Analysis for Outsourcing Decision

$$

Make

Buy

$$

$$

Unit

Unit

Difference

Variable cost per unit:

$$

$$

$$

Direct materials

$10$

$10$

$0$

Direct labor

$1$

$0$

$1$

Variable overhead

$2$

$0$

$2$

Fixed overhead

$7$

$7$

$0$

Total variable cost per unit

$20$

$10$

$3$