Sally First makes downhill ski equipment Assume that Atomic has offered to produce ski poles for Safety First for $20 per pair Safety Fest needs 150.000 pairs of poles per period Safety First can only avoid $150,000 of fixed costs if it outsources, the remaining foxed costs are unavoidable Safety First currently has the following costs at a production level of 150,000 (Click the icon to view the table) pairs of poles 1. 2 Should Safety First outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Safety First's operating income? If the freed capacity could be used to produce ski boots that would provide $845,000 of operating income, should Safety First outsource so pole production? 1. Should Safety First outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Safety Firsts operating income? Begin by proparing the incremental analysis for outsourcing decision (Use a minus sign or parentheses in the Difference column if the cost to make exceeds the cost to outsource) Incremental Analysis Outsourcing Decisions Variable costs: Make Ski Poles Outsource Ski Poles Difference Data table Plus: Fixed costs Total cost of producing 150,000 pairs of poles Cost per pair Manufacturing Costs Total Cost (150,000 pairs) Direct Materials $ 1,350,000 $ 9.00 Direct Labor 135,000 090 Variable MOH 750,000 1,020,000 5.00 6.80 Fixed MOH $ 3,255,000 $ 21.70 Total