Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Cannot find solutions for the following document within database. Can you assist Case 11-4: OmniSport Inc. OmniSport Inc. is a wholesale distributor supplying a wide

image text in transcribed

Cannot find solutions for the following document within database. Can you assist

image text in transcribed Case 11-4: OmniSport Inc. OmniSport Inc. is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores. OmniSport has an enviable reputation for quality of its products. In fact, the demand for its products is so great that at times OmniSport cannot satisfy the demand and must delay or refuse some orders, in order to maintain its production quality. Additionally, OmniSport purchases some of its products from outside suppliers in order to meet the demand. These suppliers are carefully chosen so that their products maintain the quality image that OmniSport has attained. About 60 percent of OmniSport's products are purchased from other companies while the remainder of the products are manufactured by OmniSport. The company has a Plastics Department that is currently manufacturing the boot for in-line skates. OmniSport is able to manufacture and sell 5,000 pairs of skates annually, making full use of its machine capacity at available workstations. Presented below are the selling price and costs associated with OmniSport's skates. Because OmniSport believes it could sell 8,000 pairs of skates annually if it had sufficient manufacturing capacity, the company has looked into the possibility of purchasing the skates for distribution. Colcott Inc., a steady supplier of quality products, would be able to provide 6.000 pairs of skates per year at a price of $75 per pair delivered to OmniSport's facility. Jack Petrone, OmniSport's product manager, has suggested that the company could make better use of its Plastics Department by manufacturing snowboard bindings. To support his position, Petrone has a market study that indicates an expanding market for snowboards and a need for additional suppliers. Petrone believes that OmniSport could expect to sell 12,000 snowboard bindings annually at a price of $60 per binding. Petrone's estimate of the costs to manufacture the bindings is presented below. Selling price per snowboard binding $60 Costs per binding Selling price per pair of skates $98 Costs per pair Molded plastic $8 Other direct materials 12 Machine time ($16/hr.) 24 Manufacturing overhead 18 Selling and admin. cost 15 Profit per pair Molded plastic $16 Other direct materials 4 Machine time ($16/hr.) 8 Manufacturing overhead 6 Selling and admin. cost 14 Profit per binding 48 $12 77 $21 Other information pertinent operations is presented below. to OmniSport's An allocated $6 fixed overhead cost per unit is included in the selling and administrative cost for all of the purchased and manufactured products. Total fixed and variable selling and administrative costs for the purchased skates would be $10 per pair. In the Plastics Department, OmniSport uses machine hours as the application base for manufacturing overhead. Included in the manufacturing overhead for the current year is $30,000 of fixed, factory-wide manufacturing overhead that has been allocated to the Plastics Department. REQUIRED: 1. Describe broad steps that OmniSport should follow to make a decision here. 2. What decision-making type or context is presented in this case? 3. State the critical success factors for OmniSport, in this case. 4. To maximize OmniSport Inc.'s profitability, recommend which product or products should be manufactured and/or purchased. Prepare an analysis based on the data presented that will show the associated financial impact. Support your answer with appropriate calculations. 5. Discuss briefly the important strategic considerations relevant to this case

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance Core Principles and Applications

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford

3rd edition

978-0077971304, 77971302, 978-0073530680, 73530689, 978-0071221160, 71221166, 978-0077905200

Students also viewed these Finance questions

Question

A ____ slope means the line is moving down and to the right.

Answered: 1 week ago

Question

Contrast main approaches to, and studies of, leadership;

Answered: 1 week ago