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Lourse: ALLITU Fall 2019 4. TechSystems manufactures an optical switch that it uses in its final product. TechSystems incurred the following manufacturing costs when it produced 66,000 units last year (Click the icon to view the manufacturing costs.) TechSystems does not yet know how many switches it will need this year, however, another company has offered to sell TechSystems the switch for $12.00 per unit. If TechSystems 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 Tech Systems make or buy the switch? Show your analysis Complete an incremental analysis to show whether Tech Systems should make or buy the switch (Enter a "O" 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.) TechSystems Incremental Analysis for Outsourcing Decision Make Unit Unit Variable cost per unit: Buy Difference le LUCTUS TO SHOW WTOTT TESTS SHORTS S TOTIS amounts to the nearest cent. Use a minus sign or parentheses when the cost to buy exceeds the cost to make.) Print Tech Systems Incremental Analysis for Outsourcing Decision Make Buy Unit Unit Difference Variable cost per unit: (3) (4) Total variable cost per unit because the variable cost per unit to make the switch is (6) Decision: (5) buy the switch than the variable cost per unit to Requirement 2. Now, assume that Tech Systems can avoid $99,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing, TechSystems needs 71,000 switches a year rather than 66,000 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 Print Decision (5) buy the switch because the variable cost per unit to make the switch is (6) than the variable cost per unit to Requirement 2. Now, assume that Tech Systems can avoid 599,000 of fixed cost a year by outsourcing production. In addition, because sales are increasing. TechSystems needs 71,000 switches a year rather than 66,000 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 (10) Total relevant costs Decision: (11) because the total relevant costs to make the switches are (12) than the total relevant costs to ASDFGHK Ace command option Print (10) Total relevant costs Decision: (11) buy the switches because the total relevant costs to make the switches are (12) than the total relevant costs to 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 making switches Cost if outsourcing switches (14) (13) 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) TechSystems 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 costis (15) $ per switch 1: Data Table Direct materials $ 660.000 Using the basic formula you determined above, solve for the outsourcing cost at which Tech Systems would be indifferent between ou Print and making the switches (Enter your per unit calculation to the nearest cent.) TechSystems would be indifferent between outsourcing and making the switches if the outsourcing cost was $ per per switch. Therefore, Systems will only be willing to outsource if the outsourcing cost is (15) switch 1: Data Table Direct materials Direct labor Variable MOH 660,000 165,000 132,000 396,000 Fixed MOH $ 1,353,000 Total manufacturing cost for 66,000 units 2: Requirements 1. Given the same cost structure, should Tech Systems make or buy the switch? Show your analysis. 2. Now, assume that Tech Systems can avoid 599,000 of fixed costs a year by outsourcing production. In addition, because sales are increasing. Tech Systems needs 71,000 switches a year rather than 66,000 switches. What should the company do now? 3. Given the last scenario, what is the most Tech Systems would be willing to pay to outsource the switches

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