Outdoor Life manufactures snowboards. Its cost of making 1,900 bindings is as follows:

Suppose Topnotch will sell bindings to Outdoor Life for $12 each. Outdoor Life would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per binding.

Requirement 1. Outdoor Life's accountants predict that purchasing the bindings from Topnotch will enable the company to avoid $1,800 of fixed overhead. Prepare an anlysis to show whether Outdoor Life should make or buy the bindings.

Binding costs Make Bindings Outsource Bindings Difference

Variable costs:
direct materials	_____________		___________
direct labor	______________		_____________
variable overhead	_______________		______________
Fixed costs	________________		_____________
Purchase price from Topnotch		__________
Transportation		___________
Logo		___________
Total differential cost of 1,900 bindings	______________	___________	____________

Should Outdoor Life make or buy the bindings?

Decision: ______?_______.

Requirement 2. The facilities freed by purchasing bindings from topnotch can be used to manufacture another product that will contribute $3,2000 to profit. Total fixed costs will be the same as if Outdoor Life had produced the bindings. Show which alternative makes the best use of Outdoor Life's facilities.

Data Table

direct materials	$ 17,530
direct labor	3,500
variable overhead	2,090
fixed overhead	6,800
Total manufacturing costs for 1,900 bindings	$ 29,920

Requirement 2 information:

BINDING COSTS MAKE BINDING FACILITIES IDLE MAKE NEW PRODUCT

Variable costs:
direct materials	______________
direct labor	______
variable overhead	______
Fixed costs	______
Purchase price of Topnotch		_____________
Transportation		________
Logo		________
expected profit from new product			________
expected net cost of obtaining 1900 bindings	_________	__________	__________

Which alternative makes the best use of Outdoor Life's facilities?

Decision: ________________________ .