Mountain fun manufactures snowboards. Its cost of making 2,000 bindings is as follows: Suppose...
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Mountain fun manufactures snowboards. Its cost of making 2,000 bindings is as follows:
Suppose Witherspoon will sell bindings to Mountain Fun for $13 each. Mountain Fun would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.60 per binding.
Data Table $ 17,600 2,900 Direct materials Direct labor Variable overhead Fixed overhead 2,100 6,600 $ 29,200 Total manufacturing costs for 2,000 bindings - Requirements 1. Mountain Fun's accountants predict that purchasing the bindings from Witherspoon will enable the company to avoid $1,900 of fixed overhead. Prepare an analysis to show whether Mountain Fun should make or buy the bindings. 2. The facilities freed by purchasing bindings from Witherspoon can be used to manufacture another product that will contribute $3,200 to profit. Total fixed costs will be the same as if Mountain Fun had produced the bindings. Show which alternative makes the best use of Mountain Fun's facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product
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