Wild Ride manufactures snowboards. Its cost of making 1,900 bindings is as follows:

Data Table:

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 Wild Ride for $15 each. Wild Ride 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 $0.60 per binding.Read the requirements

Requirements:

1.

Wild Ride's accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $1,800 of fixed overhead. Prepare an analysis to show whether Wild Ride should make or buy the bindings.

2.

The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.

Requirement 1.

Wild Ride's accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $1,800 of fixed overhead. Prepare an analysis to show whether Wild Ride should make or buy the bindings. (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. Use a minus sign or parentheses in the Difference column when the cost to make exceeds the cost to buy.)

Incremental Analysis	Make	Buy (Outsource)
Outsourcing Decision	Bindings	Bindings	Difference
Variable Costs
Plus: Fixed Costs
Total cost of 1,900 bindings

Requirement 2.

The facilities freed by purchasing bindings from the outside supplier can be used to manufacture another product that will contribute $3,100 to profit. Total fixed costs will be the same as if Wild Ride had produced the bindings. Show which alternative makes the best use of Wild Ride's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.