Requirements 1. Given the same cost structure, should GlobalSystems make or buy the switch? Show your analysis. 2. Now, assume that GlobalSystems can avoid $97,000 of xed costs a year by outsourcing production. In addition, because sales are increasing, GlobalSystems needs 72,000 switches a year rather than 67,000 switches. What should the company do now? 3. Given the last scenario, what is the most GlobalSystems would be willing to pay to outsource the switches? \fGlobalSystems manufactures an optical switch that it uses in its nal product. GlobalSystems incurred the GlobalSystems does not yet know how many switches it will need this year; however, another company following manufacturing costs when it produced 67,000 units last year: has offered to sell GlobalSystems the switch for $15.00 per unit. If GlcbalSystems buys the switch from (Click the icon to view the manufacturing costs.) the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose, yet none of the xed costs are avoidable. Requirement 1. Given the same cost structure, should GlobalSystems make or buy the switch? Show your analysis. Complete an incremental analysis to show whether GlobalSystems 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.) GlobalSystems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials $ 10.00 $ 0.00 $ 1000 Direct labor 2.50 0.00 2.50 Variable overhead 1.00 0.00 1.00 Purchase price from outsider 0-00 15-00 (1500) $ 13.50 $ 15.00 $ (1.50) Total variable cost per unit Decision: Make the optical switch because the variable cost per unit to make the switch is less than the variable cost per unit to buy the switch. GlobalSystems manufactures an optical switch that it uses in its nal product. GlobalSystems incurred the GlobalSystems does not yet know how many switches it will need this year; however, another company following manufacturing costs when it produced 67,000 units last year: has offered to sell GlobalSystems the switch for $15.00 per unit. If GlobalSystems buys the switch from (Click the icon to view the manufacturing costs.) the outside supplier, the manufacturing facilities that will be idle cannot be used for any other purpose, yet none of the xed costs are avoidable. M... WNW... w... y... w... Decision: Make the optical switch because the variable cost per unit to make the switch is less than the variable cost per unit to buy the switch. Requirement 2. Now, assume that GlobalSystems can avoid $97,000 of xed costs a year by outsourcing production. In addition, because sales are increasing, GlobalSystems needs 72,000 switches a year rather than 67,000 switches What should the company do now? Complete an outsourcing decision analysis assuming xed costs can be avoided by outsourcing production and the number of units needed have increased. GlobalSystems Outsourcing Decision Make Buy switches switches 368,500 Total relevant costs