$\backslash$table$[[$Data table,Data table$],[,$A$,$B$,$TechSystems$],[1,$Direct materials,$$,770,000,$Incremental Analysis for Outsourcing Decision$],[2,$Direct labor,$140,000,\{$

$\backslash$table$[[$Make$],[$Unit$]]\},$Buy,Difference$],[3,$Variable MOH,$210,000,$Unit$],[4,$Fixed MOH,$455,000,$Variable cost per unit:$],[,$Total manufacturing cost for $70,000$ units,$$,1,575,000,$Direct materials,$$,11\mathrm{.}00$$$,0\mathrm{.}00$$$,11\mathrm{.}00],[,11,,\backslash$table$[[$Direct labor$],[$Variable overhead$]],,\backslash$table$[[2\mathrm{.}00],[300]],\backslash$table$[[0\mathrm{.}00],[0,0]],\backslash$table$[[2\mathrm{.}00]]],[,,\backslash$table$[[$Purchase price from outsider$],[$Variable cost per unit$]],,\backslash$table$[[\backslash$table$[[3\mathrm{.}00],[0\mathrm{.}00]]]],\backslash$table$[[\backslash$table$[[0\mathrm{.}00],[12\mathrm{.}50]]]],\backslash$table$[[\backslash$table$[[3\mathrm{.}00],[(12\mathrm{.}50)]]]]],[,,,16\mathrm{.}00=^($$$),12\mathrm{.}50=^($$$),3\mathrm{.}50]]$ TechSystems manufactures an optical switch that it uses in its final product. TechSystems

incurred the following manufacturing costs when it produced $70,000$ units last year:

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

Another company has offered to sell TechSystems the switch for $$12\mathrm{.}50$ per unit. If

TechSystems 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.$)$

TechSystems needs $82,000$ optical switches next year $($assume same relevant range$).$

By outsourcing them, TechSystems can use its idle facilities to manufacture another

product that will contribute $$218,000$ to operating income, but none of the fixed costs will

be avoidable. Should TechSystems make or buy the switches? Show your analysis.

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

TechSystems

Best Use of Facilities Analysis