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REQUIREMENTS
DATA TABLE
QUSTIONS
Requirements 1. Wild Ride's accountants predict that purchasing the bindings from Otter will enable the company to avoid $3,200 of fixed overhead. Prepare an analysis to show whether Wild Ride should make or buy the bindings. 2. The facilities freed by purchasing bindings from Otter can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Costs $ Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing costs Cost per pair ($29,030 / 1,800) 17,220 3,300 2,010 6,500 $ 29,030 $ 16.13 Wild Ride Snowboard Mfg. Inc. manufactures snowboards. Its cost of making 1,800 bindings is as follows: (Click the icon to view the costs.) Suppose Otter will sell bindings to Wild Ride for $15 each. Wild Ride will pay $3.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.20 per binding. Requirements Requirement 1. Wild Ride's accountants predict that purchasing the bindings from Otter will enable the company avoid $3,200 of fixed overhead. Prepare analysis to show whether Wild Ride should make or buy the bindings. (If a box is not used in the table, leave the box empty; do not enter a zero. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an outsourcing analysis. All boxes in the Cost Make Minus the Cost to Buy column should have a value entered.) Wild Ride Snowboard Mfg. Inc. Outsourcing Analysis Make Cost to Make Minus Buy Bindings Binding Cost to Buy Total cost: Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Otter Transportation Logo Total cost of 1,800 bindings Decision: Requirem bindings outsourci purchasing bindings from Otter can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make Icilities idle, or (c) buy bindings and make another product. (If a box is not used in the table, leave the box empty; do not enter a zero. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an Buy the bindings Make the bindings Do nothing Vild Ride Snowboard Mfg. Ltd. Requirement 2. The facilities freed by purchasing bindings from Otter can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. (If a box is not used in the table, leave the box empty; do not enter a zero. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an outsourcing analysis.) Wild Ride Snowboard Mfg. Ltd. Best Use of Facilities Analysis Make Buy Bindings Leave Make Another Facilities Idle Product Bindings Direct materials Direct labour Variable overhead Fixed overhead Purchase price from Otter Transportation Logo Expected profit from other product Expected net cost Decision: Requirement 2. The facilities freed by purchasing bindings from Otter can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (e) buy bindings and make another product. (If a box is not used in the table, leave the box empty; do not enter a zero. Use a minus sign or parentheses for subtracting numbers that are typically shown enclosed in parentheses in an outsourcing analysis.) Wild Ride 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 Transporti Logo Expected Buy the bindings and use the facilities to make another product Buy the bindings and leave the facilities idle Continue to make the bindings Do nothing Expected Decision
