25A Making outsourcing decisions Snow Ride manufactures snowboards. Its cost of making 1,900 bindings is as follows: Suppose Livingston will sell bindings to Snow Ride for $13 each. Snow Ride would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Requirements 1. Snow Ride's accountants predict that purchasing the bindings from Livingston will enable the company to avoid $2,100 of fixed overhead. Prepare an analysis to show whether Snow Ride should make or buy the bindings. $(6,380) 2. The facilities freed by purchasing bindings from Livingston can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Snow Ride had produced the bindings. Show which alternative makes the best use of Snow Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Learning Objective 25.4 P25-26A Making sell or process further decisions 5-5. Making product mix decisions StoreAll produces plastic storage bins for household storage needs. The company makes two sizes of bins: large ( 50 gallon) and regular ( 35 gallon). Demand for the products is so high that StoreAll can sell as many of each size as it can produce. The company uses the same machinery to produce both sizes. The machinery can be run for only 3,300 hours per period. StoreAll can produce 10 large bins every hour, whereas it can produce 17 regular bins in the same amount of time. Fixed costs amount to $115,000 per period. Sales prices and variable costs are as follows: Requirements 1. Which product should StoreAll emphasize? Why? 2. To maximize profits, how many of each size bin should StoreAll produce? 3. Given this product mix, what will the company's operating income be