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

Mountain Rides

for

$15

each.

Mountain Rides

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

$0.50

per binding.Read the requirements

LOADING...

.

Question content area bottom

Part 1

Requirement 1.

Mountain Rides'

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

$1,800

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
Total cost of 26,200 bindings

Part 2

Decision:

Make the bindings.

Buy the bindings.

Part 3

Requirement 2. The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute

$3,500

to profit. Total fixed costs will be the same as if

Mountain Rides

had produced the bindings. Show which alternative makes the best use of

Mountain Rides'

facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. (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.)

		Buy (Outsource) Bindings
Incremental Analysis	(a) Make	(b) Leave	(c) Make
Outsourcing Decision	Binding	Facilities Idle	Another Product
Variable Costs
Plus: Fixed Costs
Total cost of 26,200 bindings
Less: Profit from another product
Net cost

Part 4

Decision:

Buy the bindings and use the facilities to make another product.

Continue to make the bindings.

Buy the bindings and leave the facilities idle.

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