Question
Outdoor Sports manufactures snowboards. Its cost of making 26,200 bindings is as follows: Direct materials: $21,000 Direct labor: $86,000 Variable manufacturing overhead: $42,000 Fixed manufacturing
Outdoor Sports manufactures snowboards. Its cost of making 26,200 bindings is as follows:
Direct materials: $21,000
Direct labor: $86,000
Variable manufacturing overhead: $42,000
Fixed manufacturing overhead: $86,400
Total manufacturing costs: $235,800
Cost per pair ($235,800/26200): $9.00
Suppose an outside supplier will sell bindings to Outdoor Sports for $15 each. Outdoor Sports will pay $2.00 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.
1) Outdoor Sports' 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 Outdoor Sports should make or buy the bindings.
Decision:
(a) Buy the buildings?
(b) Make the buildings?
(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.)
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