Answer the following question: Mrzek Inc. manufactures snowboards. Its cost of making 3,500 bindings is...
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Accounting
Answer the following question:
Mrzek Inc. manufactures snowboards. Its cost of making 3,500 bindings is as follows:
Direct materials $35,200
Direct labour 4,950
Variable manufacturing overhead 6,820
Fixed manufacturing overhead 14,630
Total manufacturing costs $61,600
The company may also choose to purchase the bindings from a supplier at $15 each. It will pay $1.80 per unit to transport the bindings to its manufacturing plant and then add its own logo at a cost of $0.20 per binding. Purchasing the bindings from outside will enable the company to avoid $6,500 of fixed overhead.
Required:
1. Using the incremental analysis for outsourcing decision, how much is the total cost difference of buying bindings from outside vs. making it on site?
Round your answer to whole amount.
2. Which option should the company choose, making the bindings or buying the bindings?
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