Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon...
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Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Hemingway will sell bindings to Cool Boards for $12 each. Cool Boards would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.60 per binding. Read the requirements. Requirement 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,200 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. (Only enter the net relevant costs. For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Binding costs Variable costs: Direct materials Direct labor Make Bindings Outsource Bindings Difference (Make-Outsource) Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Total differential cost of 2,100 bindings Should Cool Boards make or buy the bindings? Decision: Requirement 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,400 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.) Binding costs Variable Costs: Outsource Bindings Make Bindings Facilities Make New Idle Product Direct materials Direct labor Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Expected profit from new product Expected net cost of obtaining 2,100 bindings Which alternative makes the best use of Cool Boards' facilities? Decision: Requirements Data table $ 17,530 3,200 Variable overhead 2,090 6,400 Fixed overhead $ 29,220 Total manufacturing costs for 2,100 bindings 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,200 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,400 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Direct materials Direct labor Drint Done Print Done Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Hemingway will sell bindings to Cool Boards for $12 each. Cool Boards would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.60 per binding. Read the requirements. Requirement 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,200 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. (Only enter the net relevant costs. For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Binding costs Variable costs: Direct materials Direct labor Make Bindings Outsource Bindings Difference (Make-Outsource) Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Total differential cost of 2,100 bindings Should Cool Boards make or buy the bindings? Decision: Requirement 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,400 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.) Binding costs Variable Costs: Outsource Bindings Make Bindings Facilities Make New Idle Product Direct materials Direct labor Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Expected profit from new product Expected net cost of obtaining 2,100 bindings Which alternative makes the best use of Cool Boards' facilities? Decision: Requirements Data table $ 17,530 3,200 Variable overhead 2,090 6,400 Fixed overhead $ 29,220 Total manufacturing costs for 2,100 bindings 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,200 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,400 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Direct materials Direct labor Drint Done Print Done
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Answer To determine whether Cool Boards should make or buy the bindings we need to compare the costs of making the bindings inhouse versus outsourcing ... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
Posted Date:
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