Sensor Systems manufactures an optical switch that it uses in its final product. Another company has offered to sell Sensor Systems the switch for $$16\mathrm{.}00$ per unit. None of Sensor's fixed costs are avoidable.

$($Click the icon to view the outsourcing decision.$)$

Sensor Systems needs $78,000$ optical switches. By outsourcing them, Sensor Systems can use its idle facilities to manufacture another product that will contribute $$218,000$ to operating income.

Read the requirements.

Requirement $1.$ Identify the expected net costs that Sensor Systems will incur to acquire $78,000$ switches under three alternative plans.

Switch costs

Requirements

Identify the expected net costs that Sensor Systems will incur to acquire $78,000$ switches under three alternative plans: make the switches, buy the switches and leave facilities idle, buy the switches and use the idle facilities to make another product.

Which plan makes the best use of Sensor System's facilities? Support your answer.

Requirement $2.$ Which plan makes the best use of Sensor System's facilities? Support your answer.

Sensor Systems should $$ because this plan results in the lowest $$

However, Sensor Systems should also consider qualitative factors such as $$

$$ and $$

Data table

$\backslash$table$[[$Variable costs:,$\backslash$table$[[$Make$],[$optical switch$]],\backslash$table$[[$Outsource$],[$optical switch$]],\backslash$table$[[$Difference$],[($Make$-$Outsource$)]]],[$Direct materials,$$,9\mathrm{.}00,,$$$,9\mathrm{.}00],[$Direct labor,,$3\mathrm{.}50,,,3\mathrm{.}50],[$Variable overhead,,$2\mathrm{.}00,,,2\mathrm{.}00],[$Purchase price from outsider,,,$16\mathrm{.}00,,(16\mathrm{.}00)$