Palge Pitre $,\frac{04}{12}\frac{?}{24}9$:$23$ PM

WorldSystems manufactures an optical switch that it uses in its final product. WorldSystems incurred the following manufacturing costs when it produced $72,000$ units last year:

$($Click the icon to view the manufacturing costs.$)$

Another company has offered to sell WorldSystems the switch for $$9\mathrm{.}50$ per unit. If WorldSystems 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.$)$

WorldSystems needs $81,000$ optical switches next year $($assume same relevant range$).$ By outsourcing them, WorldSystems can use its idle facilities to manufacture another product that will contribute $$110,000$ to operating income, but none of the fixed costs will be avoidable. Should WorldSystems make or buy the switches? Show your analysis.

Complete the Best Use of Facilities Analysis. $($Enter a $"0"$ for any zero amounts.$)$

WorldSystems

Best Use of Facilities Analysis

Expected net cost of obtaining the optical switches

Data table

$\backslash$table$[[,$A$,,$B$],[1,$Direct materials,$$,720,000],[2,$Direct labor,,$108,000],[3,$Variable MOH,,$72,000],[4,$Fixed MOH,,$504,000],[5,$Total manufacturing cost for $72,000$ units,$$,1,404,000$