Solved: Winter Sports manufacture snowboards Its cost of

making 2 100 bindings

Winter Sports manufacture snowboards Its cost of making 2 100 bindings

Winter Sports manufacture snowboards. Its cost of making 2,100 bindings is as follows:

Direct materials........................................................... $ 17,600

Direct labor................................................................. 2,600

Variable overhead....................................................... 2,120

Fixed overhead........................................................... 6,800

Total manufacturing costs for 2,100 bindings............ $ 29,120

Suppose Lewis will sell bindings to Winter Sports for $15 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 $0.40 per binding.

Requirements

1. Winter Sports’ accountants predict that purchasing the bindings from Lewis will enable the
company to avoid $2,100 of fixed overhead. Prepare an analysis to show whether Winter Sports
should make or buy the bindings.

2. The facilities freed by purchasing bindings from Lewis can be used to manufacture another
product that will contribute $3,100 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.

Winter Sports manufacture snowboards Its cost of making 2 100 bindings

ANSWER
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making-2-100-bindings/

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