Requirements 1. Mountain Fun's accountants predict that purchasing the bindings from Lewis will enable the company to avoid $1,800 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 Lewis 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. Direct materials $ TA 17,510 Direct labor 2,600 Variable overhead 2,070 6,800 Fixed overhead $ 28,980 Total manufacturing costs for 2,100 bindings Mountain Fun manufactures snowboards. Its cost of making 2,100 bindings is as follows: (Click the icon to view the costs.) Suppose Lewis 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 $0.70 per binding. Read the requirements Difference Requirement 1. Mountain Fun's accountants predict that purchasing the bindings from Lewis will enable the company to avoid $1,800 of fixed overhead. Prepare an analysis to show whether Mountain Fun 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 Binding costs Bindings Bindings (Make-Outsource) Variable costs: Direct materials Direct labor Variable overhead Fixed costs Purchase price from Lewis Transportation Logo Total differential cost of 2,100 bindings Should Mountain Fun make or buy the bindings? Decision: Requirement 2. The facilities freed by purchasing bindings from Lewis 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. (Only enter the net relevant costs. Enter all costs as positive values. Use a minus sign or parentheses for decreases to net costs.) Outsource Bindings Make Facilities Make New Binding costs Bindings Idle Product Variable Costs: Direct materials Direct labor Variable overhead Fixed costs Purchase price from Lewis Transportation Logo Expected profit from new product Expected net cost of obtaining 2,100 bindings Which alternative makes the best use of Mountain Fun's facilities? Decision