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Part $1$

RootSystemsRootSystems

manufactures an optical switch that it uses in its final product.

RootSystemsRootSystems

incurred the following manufacturing costs when it produced

$67$ comma $00067,000$

units last$$year:

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RootRootSystems

does not yet know how many switches it will need this$$year; however, another company has offered to sell

RootSystemsRootSystems

the switch for

$ $15\mathrm{.}00$$$15\mathrm{.}00$

per unit. If

RootSystemsRootSystems

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.

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Part $1$

Requirement $1.$ Given the same cost$$structure$,$ should

RootSystemsRootSystems

make or buy the$$switch$?$ Show your analysis.

Complete an incremental analysis to show whether

RootRootSystems

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

$$9\mathrm{.}00$

$15$

$(6)$

Direct labor

$2\mathrm{.}50$

$0\mathrm{.}00$

$(2\mathrm{.}50)$

Variable overhead

$2\mathrm{.}00$

$0\mathrm{.}00$

$(2\mathrm{.}00)$

$$

$$

$$

Total variable cost per unit

$$13\mathrm{.}50$

$$15\mathrm{.}00$

$$(1\mathrm{.}50)$