Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Hemingway will sell bindings to Cool Boards for $16 each. Cool Boards would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per binding. Requirements - X 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,400 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,500 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Data table Direct materials Direct labor Variable overhead Fixed overhead Total manufacturing costs for 2,100 bindings Print Done $ 17,590 3,000 S 2,030 6,600 29,220 - X
Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Hemingway will sell bindings to Cool Boards for $16 each. Cool Boards would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.40 per binding. Requirements - X 1. Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the company to avoid $2,400 of fixed overhead. Prepare an analysis to show whether Cool Boards should make or buy the bindings. 2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture another product that will contribute $3,500 to profit. Total fixed costs will be the same as if Cool Boards had produced the bindings. Show which alternative makes the best use of Cool Boards' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product. Data table Direct materials Direct labor Variable overhead Fixed overhead Total manufacturing costs for 2,100 bindings Print Done $ 17,590 3,000 S 2,030 6,600 29,220 - X
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Cool Boards manufactures snowboards. Its cost of making 2,100 bindings is as follows:
(Click the icon to view the costs.)
Suppose Hemingway will sell bindings to Cool Boards for $16 each. Cool Boards would pay $3 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of
$0.40 per binding.
Requirements
1.
Cool Boards' accountants predict that purchasing the bindings from Hemingway will enable the
company to avoid $2,400 of fixed overhead. Prepare an analysis to show whether
Cool Boards should make or buy the bindings.
2. The facilities freed by purchasing bindings from Hemingway can be used to manufacture
another product that will contribute $3,500 to profit. Total fixed costs will be the same as if
Cool Boards had produced the bindings. Show which alternative makes the best use of
Cool Boards' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy
bindings and make another product.
Print
- X
Done
Data table
4
Direct materials
Direct labor
Variable overhead
Fixed overhead
Total manufacturing costs for 2,100 bindings
Print
Done
$
17,590
3,000
2,030
6,600
$ 29,220
=
x
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