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Requirements 1. Outdoor Fun's accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,100 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 $3,400 to profit. Total fixed costs will be the same as if Outdoor Fun had produced the bindings. Show which alternative makes the best use of Outdoor Fun's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (C) buy bindings and make another product. Data Table 18,500 2,900 Direct materials. $ Direct labor.... Variable manufacturing overhead.... Fixed manufacturing overhead $ Total manufacturing costs... Cost per pair ($29,785 : 1,850) .....$ 1,285 7,100 29,785 16.10 Outdoor Fun manufactures snowboards. Its cost of making 1,850 bindings is as follows: (Click the icon to view the costs.) Suppose an outside supplier will sell bindings to Outdoor Fun for $14 each. Outdoor Fun will pay $3.00 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. Outdoor Fun's accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,100 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 1,850 bindings Decision Requirement 2. The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $3,400 to profit. Total fixed costs will be the same as if Outdoor Fun had produced the bindings. Show which alternative makes the best use of Outdoor Fun'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.) Incremental Analysis Outsourcing Decision Variable Costs (a) Make Binding Buy (Outsource) Bindings (b) Leave (c) Make Facilities Idle Another Product Plus: Fixed Costs Total cost of 1,850 bindings Less: Profit from another product Net cost Decision
