Requirement 1. Given the same cost structure, should RootSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether RootSystems 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.) RootSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials 10.00 $ 0.00 $ 10.00 Direct labor 2.00 0.00 2.00 Variable overhead 3.00 0.00 3.00 Purchase price from outsider 0.00 13.50 (13.50) 15.00 1.50 Total variable cost per unit 13.50 $ Decision: Buy the optical switch because the variable cost per unit to make the switch is greater than the variable cost per unit to buy the switch. Requirement 2. Now, assume that RootSystems can avoid $105,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, RootSystems needs 73,000 switches a year rather than 68,000 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. RootSystems Outsourcing Decision Make Buy switches switches Variable cost per unit 15.00 $ 3.50 Units needed 73,000 73,000 Total variable costs 1,095,000 985,500 Fixed costs 374,000 269,000 1,469,000 $ 1,254,500 Total relevant costs Decision: Buy the optical switch because the total relevant costs to make the switches are greater than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most RootSystems would be willing to pay to outsource the switches? Begin by identifying the basic formula that is used to determine the indifferent outsourcing cost per unit. Cost if making switches Cost if outsourcing switches Variable costs + Fixed costs Variable costs + Fixed costs Using the basic formula you determined above, solve for the outsourcing cost at which RootSystems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) RootSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ 16.44 per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is less than $ 16.44 per switch.FiberSystems manufactures an optical switch that it uses in its final product. FiberSystems incurred the following manufacturing costs when it produced 73,000 units last year: FiberSystems does not yet know how many switches it will need this year, however, another company has offered to sell FiberSystems the switch for $15.00 per unit. If FiberSystems Eff(Click the icon to view the manufacturing costs.) 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 FiberSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether FiberSystems 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.) Fiber Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: - X Requirements 1. Given the same cost structure, should FiberSystems make or buy the switch? Show your analysis. Total variable cost per unit 2. Now, assume that FiberSystems can avoid $104,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, FiberSystems needs 78,000 switches a year rather than 73,000 switches. What X should the company do now? Data table 3. Given the last scenario, what is the most FiberSystems would be willing to pay to outsource the switches? A B 1 Direct materials S 584,000 Print Done 2 Direct labor 146,000 3 Variable MOH 219,000 4 Fixed MOH 474,500 5 Total manufacturing cost for 73,000 units S 1,423,500 Print Done