Outdoor Life Snowboard Mfg. Inc. manufactures snowboards. Its cost of making 23,600 bindings is as follows:

Suppose Top notch will sell bindings to Outdoor Lifefor$15each. Out door Life will pay$1.00per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of$0.20 per binding.

Requirement 1. Outdoor Life's accountants predict that purchasing the bindings from Topnotch will enable the company to avoid $2,200 of fixed overhead. Prepare an analysis to show whether Outdoor Life should make or buy the bindings. (Leave any unused cells blank. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an outsourcing analysis.)

Decision: ------------------- (buy the bindings or make the bindings)

Requirement 2. The facilities freed by purchasing bindings from Topnotch can be used to manufacture another product that will contribute$3,500to 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: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. (Leave any unused cells blank. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in a best use of facilities analysis.)

Decision options buy the

x More Info $ 24,000 82,000 Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs Cost per pair ($236,000 / 23,600) 48,000 82,000 $ 236,000 CA $ 10.00 Print Done Outdoor Life Snowboard Mfg.Inc. Outsourcing Analysis Make Binding Buy Bindings Cost to Make Minus Cost to Buy Total cost: Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Topnotch Transportation Logo Total cost of 23,600 bindings Outdoor Life Snowboard Mfg. Ltd. Best Use of Facilities Analysis Buy Bindings Make Leave Make Another Bindings Facilities Idle Product Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Topnotch Transportation Logo Expected profit from other product Expected net cost Decision