i Requirements 1. Cool Boards's accountants predict that purchasing the bindings from Lewis will enable the company to avoid $3,200 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 Lewis can be used to manufacture another product that will contribute $2,900 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's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. i Costs Direct materials Direct labour. ....... ............ 17,230 3,500 2,060 6,100 Variable manufacturing overhead ....... Fixed manufacturing overhead ...... 28,890 Total manufacturing costs 16.05 Cost per pair ($28,890 / 1,800) .... Outsourcing Analysis Make Cost to Make Minus Buy Bindings Binding Cost to Buy Total cost: Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Lewis Transportation Logo Total cost of 1,800 bindings Outsourcing Analysis Outsourcing Make Buy Binding Bindings Cost to Make Minus Cost to Buy Total cost: Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Lewis Transportation Logo Total cost of 1,800 bindings Buy the bindings and use the facilities to make another product Buy the bindings and leave the facilities idle Continue to make the bindings Do nothing Decision