Refer to E8-44B. Tech Systems needs 78,000 optical switches next year (assume same relevant range). By outsourcing them, Tech Systems can use its idle facilities to manufacture another product that will contribute $220,000 to operating income, but none of the fixed costs will be avoidable. Should Tech Systems make or buy the switches? Show your analysis.

In E8-44B

Direct materials………………………………………………$781,000

Direct labor……………………………………………………..142,000

Variable MOH…………………………………………………213,000

Fixed MOH…………………………………………………….390,500

Total manufacturing cost for 71,000 units………$1,526,500



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