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Mountain SportsMountain Sports manufactures snowboards. Its cost of making 19,000 bindings is as follows: Direct materials. . . . . . . . . .

Mountain SportsMountain Sports manufactures snowboards. Its cost of making 19,000 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

Mountain SportsMountain Sports for $15 each.Mountain SportsMountain Sports 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

.

.

Requirement 1. Mountain Sports'Mountain Sports'

accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,600 of fixed overhead. Prepare an analysis to show whether Mountain SportsMountain Sports 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

$147,000

$332,500

$185,500

Plus: Fixed Costs

81,000

78,400

(2,600)

Total cost of 19,000 bindings

$228,000

$410,900

$182,900

Decision:

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 $2,600 to profit. Total fixed costs will be the same as if

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

Mountain Sports'Mountain Sports'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

I only need help with requirement 2

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