Manufacturing costs data table:

Direct materials $ 560,000

Direct labor 140,000

Variable MOH 210,000

Fixed MOH 385,000

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Total manufacturing cost for 70,000 units $ 1,295,000

TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produced 70,000 units last year: (Click the icon to view the manufacturing costs.) Tech Systems does not yet know how many switches it will need this year, however, another company has offered to sell Tech Systems the switch for $11.00 per unit. If TechSystems 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. Read the requirements Requirement 1. Given the same cost structure, should Tech Systems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether Tech Systems 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.) i Requirements - X Tech Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Variable cost per unit: Difference 1. Given the same cost structure, should Tech Systems make or buy the switch? Show your analysis. 2. Now, assume that TechSystems can avoid $104,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, TechSystems needs 75,000 switches a year rather than 70,000 switches. What should the company do now? 3. Given the last scenario, what is the most TechSystems would be willing to pay to outsource the switches? Total variable cost per unit Print Done