***It's for Managerial Accounting Class***

Outsourcing Rangeley snow makes skis. Assume that a company has offered to produce skis for Rangeley snow for $900 per pair of skis. Rangeley snow needs 3,000 pairs of skis per period. Rangeley snow can avoid $200,000 of fixed costs if it outsources, the remaining fixed costs are unavoidable. Rangeley snow has the following costs at a production level of 3,000 skis: 1. Should Rangeley snow outsource ski production if the next best use of the freed capacity is to do nothing and leave it idle. What effect will outsourcing have on Rangeley snow's operating income? 2. If the freed capacity is best used to produce snowboards that would provide $2,000,000 of operating income, should Rangeley snow outsource ski production