Winter Sports manufactures snowboards. Its cost of making 1,700 bindings is as follows: (Click the icon to view the costs.) Suppose Livingston will sell bindings to Winter Sports for $16 each. Winter Sports would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.60 per binding. Read the requirements. Requirement 1. Winter Sports' accountants predict that purchasing the bindings from Livingston will enable the company to avoid $1,900 of fixed overhead. Prepare an analysis to show whether Winter Sports 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 Direct labor Variable overhead Fixed costs Purchase price from Livingston Transportation Logo Total differential cost of 1,700 bindings Enter any number in the edit fields and then continue to the next question. Should Winter Sports make or buy the bindings? Decision: Requirement 2. The facilities freed by purchasing bindings from Livingston can be used to manufacture another product that will contribute $3,300 to profit. Total fixed costs will be the same as if Winter Sports had produced the bindings. Show which alternative makes the best use of Winter Sports' facilities. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.) Outsource Bindings Make Facilities Make New Binding costs Bindings Idle Product Variable Costs: Direct materials Direct labor Variable overhead Fixed costs Purchase price from Livingston Transportation Logo Expected profit from new product Expected net cost of obtaining 1,700 bindings Which alternative makes the best use of Winter Sports' facilities? Decision: i Data Table X $ Direct materials Direct labor Variable overhead Fixed overhead 17,590 2,900 2,090 6,600 $ 29,180 Total manufacturing costs for 1,700 bindings - Requirements 1. Winter Sports' accountants predict that purchasing the bindings from Livingston will enable the company to avoid $1,900 of fixed overhead. Prepare an analysis to show whether Winter Sports should make or buy the bindings. The facilities freed by purchasing bindings from Livingston can be used to manufacture another product that will contribute $3,300 to profit. Total fixed costs will be the same as if Winter 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 (C) buy bindings and make another product
