Weekenders manufactures wooden decks. The costs to make 1,800 7-ply decks from maple wood are:

Suppose Weekenders can purchase 7-ply decks from Lancaster Company for \(\$ 14\) each. Weekenders would pay \(\$ 1\) per unit to transport the decks to its manufacturing plant, where it would add its own logo at a cost of \(\$ 0.50\) per deck.

Requirements 

1. Weekenders's accountants predict that purchasing the decks from Lancaster would enable the company to avoid \(\$ 2,200\) of fixed overhead. Prepare an analysis to show whether Weekenders should make or buy the decks.

2. The facilities freed by purchasing decks from Lancaster can be used to manufacture another product that will contribute \(\$ 3,100\) to profit. Total fixed costs will be the same as if Weekenders had produced the decks. Show which alternative makes the best use of Weekenders's facilities:

(a) make decks,

(b) buy decks and leave facilities idle,

(c) buy decks and make the other product. 

Transcribed Image Text:

Direct materials Direct labor Variable overhead $17,520 3,100 2,080 Fixed overhead 6,800 Total manufacturing costs for 1,800 decks $29,500