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Outdoor Life manufactures snowboards. Its cost of making 2,000 bindings is as follows: Direct materials $17,550 Direct labor 3,400 Variable overhead 2,040 Fixed overhead 6,300
Outdoor Life manufactures snowboards. Its cost of making 2,000 bindings is as follows: | ||||||||||
Direct materials | $17,550 | |||||||||
Direct labor | 3,400 | |||||||||
Variable overhead | 2,040 | |||||||||
Fixed overhead | 6,300 | |||||||||
Total manufacturing cost for 2,000 bindings | $29,290 | |||||||||
Suppose Lancaster will sell bindings to Outdoor Life for $14 each. Outdoor Life 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. | ||||||||||
Requirements: | ||||||||||
1. Outdoor Life's accountants predict that purchasing the bindings from Lancaster will enable the company to avoide $2,100 of fixed overhead. Prepare an analysis to show whether Outdoor Life should make or buy the bindings. |
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