REQUIRED:To maximize OmniSport Inc.'s profitability, recommend which product or products should be manufactured and/or purchased. Analyze based on the data presented that will show the associated financial impact. Support your answer with appropriate calculations and strategic considerations.

Case 11-4: OmniSport Inc. OmniSport Inc. is a wholesale distributor use of its Plastics Department by manufacturing supplying a wide range of moderately priced snowboard bindings. To support his position, sporting equipment to large chain stores. Petrone has a market study that indicates an OmniSport has an enviable reputation for quality expanding market for snowboards and a need for of its products. In fact, the demand for its additional suppliers. Petrone believes that products is so great that at times OmniSport OmniSport could expect to sell 12,000 cannot satisfy the demand and must delay or snowboard bindings annually at a price of $60 refuse some orders, in order to maintain its per binding. Petrone's estimate of the costs to production quality. Additionally, OmniSport manufacture the bindings is presented below. purchases some of its products from outside suppliers in order to meet the demand. These Selling price per snowboard $60 suppliers are carefully chosen so that their binding products maintain the quality image that Costs per binding OmniSport has attained. About 60 percent of Molded plastic $16 OmniSport's products are purchased from other Other direct materials companies while the remainder of the products Machine time ($16/hr.) are manufactured by OmniSport. The company Manufacturing overhead has a Plastics Department that is currently Selling and admin. cost 14 48 manufacturing the boot for in-line skates. Profit per binding $12 OmniSport is able to manufacture and sell 5,000 pairs of skates annually, making full use of its Other information pertinent to OmniSport's machine capacity at available workstations. operations is presented below. Presented below are the selling price and costs associated with OmniSport's skates. An allocated $6 fixed overhead cost per unit is included in the selling and administrative cost Selling price per pair of skates $98 for all of the purchased and manufactured Costs per pair products. Total fixed and variable selling and Molded plastic $8 administrative costs for the purchased skates Other direct materials 12 would be $10 per pair. Machine time ($16/hr.) 24 Manufacturing overhead 18 In the Plastics Department, OmniSport uses Selling and admin. cost 15 77 machine hours as the application base for Profit per pair $21 manufacturing overhead. Included in the manufacturing overhead for the current year is Because OmniSport believes it could sell 8,000 $30,000 of fixed, factory-wide manufacturing pairs of skates annually if it had sufficient overhead that has been allocated to the Plastics manufacturing capacity, the company has looked Department. into the possibility of purchasing the skates for distribution. Colcolt Inc., a steady supplier of REQUIRED: To maximize OmniSport Inc.'s quality products, would be able to provide 6.000 profitability, recommend which product or pairs of skates per year at a price of $75 per pair products should be manufactured and or delivered to OmniSport's facility. purchased. Prepare an analysis based on the data presented that will show the associated financial Jack Petrone, OmniSport's product manager, has impact. Support your answer with appropriate suggested that the company could make better calculations and strategic considerations