Requirement 2. The facilities freed by purchasing bindings from Monroe can be used to manufacture another product that will contribute $3,200 to profit. Total fixed costs will be the same as if Outdoor LifeOutdoor Life had produced the bindings. Show which alternative makes the best use of Outdoor Life's facilities. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs .)
Outdoor Life manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon lo view the costs.) Suppose Monroe will sell bindings to Outdoor Life for $16 each. Outdoor Life would pay $1 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding, Read the requirements. Decision: Make the bindings. Requirement 2. The facilities freed by purchasing bindings from Monroe can be used to manufacture another product that will contribute $3.200 to 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. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net oosis.) Outsource Bindings Make Facilities Make New Binding costs Bindings Idle Product Variable Costs: Direct materials Direct labor Variable overhead Fixed costs Purchase price from Monroe Transportation Logo Expected profit from new product Expected net cost of obtaining 2,100 bindings Outdoor Life manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Monroe will sell bindings to Outdoor Life for $16 each. Outdoor Life would pay $1 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.50 per binding. Read the requirements. Requirement 1. Outdoor Life's accountants predict that purchasing the bindings from Monroe will enable the company to avoid $2,500 of fixed overhead. Prepare an analysis to show whether Outdoor Life should make or buy the bindings. (Only enter the net relevant costs. For the Difference column, use a minus sign or parentheses only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Make Outsource Difference Binding costs Bindings Bindings (Make-Outsource) Variable costs: Direct materials $ 17,590 17,590 Direct labor 3,100 2,080 2,500 Variable overhead Fixed costs Purchase price from Monroe Transportation $ 33,600 2,100 1,050 36,750 3,100 2,080 2,500 (33,600) (2,100) (1,050) (11,480) Logo $ 25,270 $ $ Total differential cost of 2,100 bindings Should Outdoor Life make or buy the bindings? Decision: Make the bindings. - X Data Table A Requirements Direct materials $ Direct labor 17,590 3,100 2,080 6,600 Variable overhead 1. Outdoor Life's accountants predict that purchasing the bindings from Monroe will enable the company to avoid $2,500 of fixed overhead. Prepare an analysis to show whether Outdoor Life should make or buy the bindings. 2. The facilities freed by purchasing bindings from Monroe can be used to manufacture another product that will contribute $3,200 to 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. Fixed overhead $ 29,370 Total manufacturing costs for 2,100 bindings Print Done Print Done
