manufactures snowboards. Its cost of making

26,200

bindings is as follows:

LOADING...

(Click the icon to view the costs.)Suppose an outside supplier will sell bindings to

Outdoor Life

for

$11

each.

Outdoor Life

will pay

$2.00

per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of

$0.20

per binding.Read the requirements

LOADING...

.

Question content area bottom

Part 1

Requirement 1.

Outdoor Life's

accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid

$2,500

of fixed overhead. Prepare an analysis to show whether the company should make or buy the bindings. (Enter a "0" for any zero balances. Round any per unit amounts to the nearest cent and your final answers to the nearest whole dollar. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.)

Incremental Analysis	Make	Buy (Outsource)
Outsourcing Decision	Bindings	Bindings	Difference
Variable Costs
Plus: Fixed Costs

accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,500 of fixed overhead. Prepare an analysis to show whether the company should make or buy the bindings.

2.

The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $3,000 to profit. Total fixed costs will be the same as if Outdoor Life had produced the bindings. Show which alternative makes the best use of Outdoor Life's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.

Direct materials. . . . . . . . . . . . . . . . . . . .	$21,000
Direct labor. . . . . . . . . . . . . . . . . . . . . . . .	86,400
Variable manufacturing overhead. . . . .	42,000
Fixed manufacturing overhead. . . . . . .	86,400
Total manufacturing costs. . . . . . . . . . .	$235,800
Cost per pair ($235,800 26,200). . . . .	$9.00

pop-up content ends

PrintDone