Question
Outdoor life manufactures snowboards. Its cost of making 24,900 binding is as follows: Suppose an outside supplier will sell binding to ourdoor life for $17
Outdoor life manufactures snowboards. Its cost of making 24,900 binding is as follows:
Suppose an outside supplier will sell binding to ourdoor life for $17 each. Outdoor life will pay $1.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.60 per binding.
Direct mater..................$ 27,000
Direct labor....................84,000
Variable manufacturing overhead.................54,000
fixed manufacturing overhead...................84,000
total manufacturing costs.....................249,000
cost per pair (249,000/ 24,900) 10.00
Requirement 1: .
Outdoor Life'sOutdoor Life's 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 Outdoor LifeOutdoor Life 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) Difference
(Outsourcing decision Binding Binding
Variable cost ??? ??? ????
Plus fixed costs ??? ??? ????
total cost of 24,900 bindings ??? ??? ???
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