2. Cool Boards manufactures snowboards. Its cost of making 1,900 bindings is as

Question

2. Cool Boards manufactures snowboards. Its cost of making 1,900 bindings is as follows: (Click the icon to view the costs.) Suppose Livingston will sell bindings to Cool Boards for $16 each. Cool Boards would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.70 per binding. Read the requirements Requirement 1. Cool Boards' accountants predict that purchasing the bindings from Livingston will enable the company to avoid $2,600 of fixed overhead. Prepare an analysis to show whether Cool Boards 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

Explanation / Answer

Make Bindings Outsource Bindings Difference variable Costs Direct Material     17,520.00     17,520.00 Direct Labour       3,000.00        3,000.00 Variable Overhead       2,110.00        2,110.00 Fixed Costs       6,400.00        3,800.00        2,600.00 Purchase Price      30,400.00 (30,400.00) Transportation        3,800.00     (3,800.00) Logo        1,330.00     (1,330.00) Total differential cost of 1900 bindings (10,300.00) Decision Make

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