Requirement 1. Winter Sports' accountants predict that purchasing the bindings from Livingston will enable the company to avoid $2.500 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 an parentheses only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Make Outsource Difference O Data Table - X Binding costs Bindings Bindings (Make-Outsource) Variable costs Direct materials Direct materials 17,600 Direct labor Direct labor 2,700 Variable overhead Variable overhead 2,060 Fixed costs 6.500 Fixed overhead Purchase price from Livingston $ 28,860 Transportation Total manufacturing costs for 1,800 bindings Logo Print Done Total differential cost of 1,800 bindings Should Winter Sports make or buy the bindings?
Requirement 1. Winter Sports' accountants predict that purchasing the bindings from Livingston will enable the company to avoid $2.500 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 an parentheses only when the cost of outsourcing exceeds the cost of making the bindings in-house.) Make Outsource Difference O Data Table - X Binding costs Bindings Bindings (Make-Outsource) Variable costs Direct materials Direct materials 17,600 Direct labor Direct labor 2,700 Variable overhead Variable overhead 2,060 Fixed costs 6.500 Fixed overhead Purchase price from Livingston $ 28,860 Transportation Total manufacturing costs for 1,800 bindings Logo Print Done Total differential cost of 1,800 bindings Should Winter Sports make or buy the bindings?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Winter Sports manufactures snowboards. Its cost of making 1,800
bindings is as follows in the data table.Suppose Livingston will sell bindings to Winter Sports for $14 each. Winter Sports would pay $1 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.
Transcribed Image Text:Requirement 2. The facilities freed by purchasing bindings from Livingston can be used to manufacture another product that will contribute $3,300 to profit. Total fixed costs will be the same as if Winter Sports had produced the bindings. Show which alternative makes the best use of Winter Sports' facilities. (Only enter the
net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.)
Outsource Bindings
Data Table
Make
Facilities
Make New
Binding costs
Bindings
Idle
Product
Variable Costs:
Direct materials
17,600
Direct materials
Direct labor
2,700
Direct labor
Variable overhead
2,060
Variable overhead
6,500
Fixed overhead
Fixed costs
2$
28,860
Purchase price from Livingston
Total manufacturing costs for 1,800 bindings
Transportation
Logo
Print
Done
Expected profit from new product
Expected net cost of obtaining 1,800 bindings
Which alternative makes the best use of Winter Sports' facilities?
Decision:
Transcribed Image Text:Winter Sports manufactures snowboards. Its cost of making 1,800 bindings is as follows:
E (Click the icon to view the costs.)
Suppose Livingston will sell bindings to Winter Sports for $14 each. Winter Sports would pay $1 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 $2,500 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
- X
Data Table
Binding costs
Bindings
Bindings
(Make-Outsource)
Variable costs:
Direct materials
Direct materials
17,600
Direct labor
Direct labor
2,700
Variable overhead
Variable overhead
2,060
Fixed costs
6,500
Fixed overhead
Purchase price from Livingston
28,860
Transportation
Total manufacturing costs for 1,800 bindings
Logo
Print
Done
Total differential cost of 1,800 bindings
Should Winter Sports make or buy the bindings?
Decision:
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