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Please help me. Thank you! Snowboard Inc. currently produces snowboards. Management is interested in outsourcing production of snowboards to a reputable manufacturing company that can
Please help me. Thank you!
Snowboard Inc. currently produces snowboards. Management is interested in outsourcing production of snowboards to a reputable manufacturing company that can supply the boards for $250 per unit. Snowboard Inc. incurs the following annual production costs to produce 6,000 snowboards internally: "Total"Annual Per Cost at ..... Unit 6,000 units Variable production costs: ......." Direct materials $ 180 S 1,080,000 Direct labor S 50 S 300,000 Manufacturing overhead 20 5 120,000 Fixed production costs: ....... ..... Factory building and equipment lease 220,000 Factory insurance 90,000 Production supervisor salary 65,000 2...... Total roduction costs S 1,875,000 Outsourcing production eliminates all variable production costs, the production supervisor's salary, and factory insurance costs. Factory building and equipment lease costs will remain the same regardless of the decision to outsource or to produce internally. Required: A. Perform a differential analysis, assuming that making the snowboard internally is one alternative, and buying the snowboard from an outside manufacturer is the other alternative. B. Explain which alternative is best and why. Your answers to this problem should be placed in the space below this line. A Alternative .... Make Buy From Differential ..... Internally Outside Amount Cost to buy from outside Variable costs: Direct materials Direct labor Manufacturing overhead Fixed costs: Factory building and equipment lease ..... Factory insurance ... Production supervisor salary Total production costs ..... .... Double click and put your answer here. B ................."Step by Step Solution
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