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:

Tech Systems 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: B (Click the icon to view the manufacturing costs.) Tech Systems does not yet know how many switches it will need this year; however, another company has offered to sell Tech Systems the switch for $15.50 per unit. If Tech Systems 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 TechSys - X Data Table Complete an incremental analysis to show whether TechSystem cost to buy exceeds the cost to make.) Jints to the nearest cent. Use a minus sign or parentheses when the TechSystems Incremental Analysis for Outsourcing D Direct materials $ 560,000 Direct labor 140,000 Make E Variable MOH Unit U 210,000 420,000 Fixed MOH Variable cost per unit: $ 1,330,000 Direct materials Total manufacturing cost for 70,000 units Direct labor Print Done Choose from any list or enter any number in the input fields a Tech Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: Direct materials Direct labor Variable overhead Purchase price from outsider Total variable cost per unit Decision: V because the variable cost per unit to make the switch is than the variable cost per unit to buy the switch. Requirement 2. Now, assume that TechSystems can avoid $102,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, Tech Systems needs 75,000 switches a year rather than 70,000 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. Tech Systems Outsourcing Decision Make Buy switches switches Variable cost per unit Units needed Total variable costs Fixed costs Total relevant costs Decision: V because the total relevant costs to make the switches are than the total relevant costs to buy the switches. Requirement 3. Given the last scenario, what is the most TechSystems 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 outsourcing switches Cost if making switches Variable costs + Fixed costs Variable costs + Fixed costs Using the basic formula you determined above, solve for the outsourcing cost at which Tech Systems would be indifferent between outsourcing and making the switches. (Enter your per unit calculation to the nearest cent.) Tech Systems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is $ per switch