Do- makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Do-It for $20 per pair Do- it needs 170,000 pairs of polos per period. Do - it can only avoid $200,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Do - it currently has the following costs at a production level of 170,000 pairs of poles Click the icon to view the table Should Do it outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Do-Its operating income? 2. It the freed capacky could be used to produce ski boots that would provide $1.323,000 of operating income, should Do - It outsource ski pole production? 1. 1. Should Do - it outsource ski pole production if the next best use of the freed capacky in to leave it idle? What effect wil outsourcing have on Do-Its operating income? Begin by proparing the incremental analysis for outsourcing decision. (Uso a minus sign or parentheses in the Difference column if the cost to make exceeds the cost to outsource.) Outsource Ski Incremental Analysis Outsourcing Decisions Make Ski Polos Poles Difference Variable costs Plus: Fixed costs 1143000 Total cost of producing 170,000 pairs of polos 00-hould rich outsource production because in operating income would decline by $1,143.000, 2. If the frond capacity could be used to produce ski boots that would provide $1,223,000 of operating income, should Do outsource ski pole production Begin by preparing the incremental analysis for outsourcing decision if the freed capacity could be used to produce ski boots that would provide $1.323.000 of operating income (Complete all nput fields Entera o for any zoro balances Use a minus son or parentheses in the Difference column if the cost to make exceeds the cost to outsouro) 2. W the freed capacity could be used to produce ski boots that would provide $1,323,000 of operating income, should Do - it outsource skl pole production? Begin by preparing the incremental analysis for outsourcing decision if the freed capacity could be used to produce ski boots that would provide $1,323,000 of operating income. (Complete al Trput fields. Enter a "o for any zero balances. Use a minus sign or parentheses in the Difference column if the cost to make exceeds the cost to outsourco) Make Ski Outsource Incremental Analysis Outsourcing Decisions Poles Ski Poles Difference Total cost of producing 170,000 pairs of poles (from Requirement 1) Less: Income from ski boots outsource 180000 Netcost outsource its ski pole production because its operating income M the frend capachy could be used to produce ski boots that would provide $1.223,000 of operating Income Do - should would increase by $180,000 Listan aining fived.costs are unavoidable Data Table cior du Manufacturing Costs Cost per pair Total Cost (170,000 pairs) $ 1,020,000 $ 6.00 ause Direct Materials uces Direct Labor 119,000 0.70 for Oy Variable MOH 5.40 es. Use 918,000 1,156,000 6.80 Fixed MOH tsourc $ 3,213,000 $ 18.90 Total poles Print Done oduce ski skif
