B D E F G H K 1 Snowshoes R Us makes snowshoes. It currently produces 2,100 pairs of snow shoes per year. 2 Its cost of making the bindings that are part of the snowshoes are as follows: 3 4 Direct materials 17,530 5 Direct labor 2,900 6 Variable overhead 2,110 7 Fixed overhead 6,800 8 9 Total cost for 2,100 bindings 29,340 10 11 Showshoes has an offer from Better Bindings to sell bindings to Shoeshoes for $ 12.00 each. 12 Snowshoes would pay $ 1.00 13 per unit to transport the bindings to its manufacturing plant, where it would add its own 14 logo at a cost of $ 0.40 per logo. 15 16 Requirement 1: 17 Snowshoes R Us accountants predict that purchasing the bindings from Better Bindings 18 will enable the company to avoid $ 2,500 in fixed overhead. Prepare an analysis 19 to show whether Snowshoes R Us should make or buy the bindings. 20 21 Requirement 2: 22 The facilities freed by purchasing bindings from Better Bindings 23 can be used to manufacture another product that will contribute $ 2,700 24 to profit. Total fixed costs will be the same as if Snowshoes R Us 25 had produced the bindings. Show which alternative makes the best use of Snowshoes facilities. 26 27 Requirement 3: 28 The Snowshoes demand has risen to the extent that Shoeshoes can sell all the product it 29 produces. Snowshoes investors desire to earn a 12% return on their combined 30 investment of $ 404,250 What price per pair should Shoeshoes set to achieve this return? 31 Following are the costs to produce 2,100 pairs of Snowshoes: 32 33 Direct materials 52,000 34 Direct labor 26,600 35 Variable overhead 15,200 36 Fixed overhead 15,200 37 38 Total cost for 2,100 pairs of shoes 109,000 39 39 40 Requirement 4: 41 Remembering that Showshoes can sell all the showshoes it produces, it desires to make 42 maximum use of its production facilities. 43 44 Snowshoes also makes a boogie board. 45 The boogie boards have a maximum demand of a 10,000 units. 46 One machine makes both the boogie boards and showshoes. 47 The machine has a maximum capacity of 30,000 48 machine hours per year. 49 The contribution margin of the boogie board is 6.25 50 per unit. The snowshoe takes 2 hours of machine 51 time to produce; the boogie board takes 1 hours to produce. 52 Assume that showshoes has been charging a price of $ 60.00 53 per pair of showshoes. 54 55 How many of each product should be produced with the capacity 56 of the machine? 57 58 59