Mountain RidesMountain Rides

manufactures snowboards. Its cost of making

19 comma 00019,000

bindings is as follows:

Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . .

$22,000

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

81,000

Variable manufacturing overhead. . . . . . . . . . . . . . . .

44,000

Fixed manufacturing overhead. . . . . . . . . . . . . . . . . . .

81,000

Total manufacturing costs. . . . . . . . . . . . . . . . . . . .

$228,000

Cost per pair ($228,000 / 19,000). . . . . . . . . . . . . . . .

$12.00

Requirement 1.

Mountain Rides'Mountain Rides'

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

$ 2 comma 100$2,100

of fixed overhead. Prepare an analysis to show whether

Mountain RidesMountain Rides

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 19,000 bindings

Decision:

Buy the bindings.

Make the bindings.

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

$ 3 comma 100$3,100

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

Mountain RidesMountain Rides

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

Mountain Rides'Mountain Rides's

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 19,000 bindings
Less: Profit from another product
Net cost

Decision:

Continue to make the bindings.

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

Buy the bindings and leave the facilities idle.