Mountain Sports manufactures snowboards. Its cost of making 1,890 bindings is as follóws: (Click the icon to view the costs.) suppose an outside supplier will sell bindings Mountain Sports for $18 each. Mountain Sports will pay $2.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.30 per binding. tead the requirements. tequirement 1. Mountain Sports' accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,600 of fixed overhead. Prepare an analysis to show whether the company should make or buy the indings. (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 Wariable Costs Plus: Fixed Costs Fotal cost of 1,890 bindings Decision: tequirement 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 Mountain Sports had produced the bindings. show which alternative makes the best use of Mountain Sports' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. (Enter a "0" for any zero balances. Round any per unit amounts to the earest cent and vour final answors to the nearost whole dollar

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Transcribed Image Text:Mountain Sports manufactures snowboards. Its cost of making 1,890 bindings is as follows: E (Click the icon to view the costs.) Suppose an outside supplier will sell bindings to Mountain Sports for $18 each. Mountain Sports will pay $2.00 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.30 per binding. Read the requirements. Requirement 1. Mountain Sports' accountants predict that purchasing the bindings from the outside supplier will enable the company to avoid $2,600 of fixed overhead. Prepare an analysis to show whether the company 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 1,890 bindings Decision: 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 Mountain Sports had produced the bindings. Show which alternative makes the best use of Mountain Sports' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) 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.)

Data table
Direct materials..
$
18,000
Direct labor
3,200
Variable manufacturing overhead.....
2,340
6,700
Fixed manufacturing overhead
$
30,240
Total manufacturing costs
Cost per pair ($30,240 ÷ 1,890)
$
16.00
...
%24
%24

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