(L.OBJ. 4) Making outsourcing decisions [10—15 min] Refer to Exercise 19-20. Opti Syste...

(L.OBJ. 4) Making outsourcing decisions [10—15 min]

Refer to Exercise 19-20. Opti Systems needs 82,000 optical switches. By outsourcing them, Opti Systems can use its idle facilities to manufacture another product that will contribute $223,000 to operating income.

Requirements

1. Identify the incremental Costs that Opti Systems will incur to acquire 82,000 switches under three alternative plans.

2. Which plan makes the best use of Opti System’s facilities? Support your answer.