Summer Sports Manufactures snowboards. Its cost of making 1,900 Bindings is as follows: Direct Materials.$17,500 Direct labor..3,000

Variable manufacturing overhead.. 3,230

Fixed manufacturing overhead. 7,050

Total manufacturing costs.. $30,780

Cost per pair ($30,780 / 1,900) = $16.20

Suppose an outside supplier will sell bindings to Summer sports for $14 each. Summer sports will pay $1.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.40 per binding. Requirement 1: Summer Sports' accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $1,900 of fixed overhead. Prepare an analysis to show whether the company should make or buy the bindings.

Requirement 2: The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $2,800 to profit. Total fixed costs will be the same as if Summer Sports had produced the bindings. Show which alternative makes the best use of Winter Sports' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or buy bindings and make another product. (Enter a 0 for any zero balances. Round any per unit amounts to the nearest cent and your final answers to the nearest whole dollar.)

Decision