Mountain Fun manufactures snowboards. Its cost of making 2,100 bindings is as follows: EEB (Click the icon to view the costs.) Suppose Hemingway will sell bindings to Mountain Fun for $14 each. Mountain Fun would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.70 per binding Read the requirements. Requirement 1. Mountain Fun's accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $1,800 of fixed overhead. Prepare an analysis to show whether Mountain Fun should make or buy the bindings. (Only enter the net relevant costs. For the Difference column, use a minus sign or parenthe only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Binding costs Variable costs: Direct materials Direct labor Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Total differential cost of 2,100 bindings Should Mountain Fun make or buy the bindings? Decision: Make the bindings. Make Bindings Outsource Bindings Difference (Make-Outsource) Data table 17510 17510 Direct materials S 17.510 3100 3100 Direct labor 3,100 2050 2050 Variable overhead 2,050 1800 1800 Fixed overhead 6,500 -24460 $ 29,160 Total manufacturing costs for 2,100 bindings 24460 Print Done - X Requirement 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $2,700 to profit. Total fixed costs will be the same as if Mountain Fun had produced the bindings. Show which alternative makes the best use of Mountain Fun's facilities. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.) Binding costs Variable Costs: Outsource Bindings Make Facilities Make New Bindings Idle Product 17510 Requirements 1. Mountain Fun's accountants predict that purchasing the bindings from Hemingway will enable 3100 the company to avoid $1,800 of fixed overhead. Prepare an analysis to show whether Mountain Fun should make or buy the bindings. 2050 2. 1800 1800 The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $2,700 to profit. Total fixed costs will be the same as if Mountain Fun had produced the bindings. Show which alternative makes the best use of Mountain Fun's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Direct materials Direct labor Variable overhead Fixed costs Purchase price from Hemingway Transportation Logo Expected profit from new product Expected net cost of obtaining 2,100 bindings Which alternative makes the best use of Mountain Fun's facilities? Decision: Make the bindings. (2700) Print Done -