Tarr manages a local camping equipment store, where the top-selling sleeping bag brings in $5,000 of contribution
Question:
Tarr manages a local camping equipment store, where the top-selling sleeping bag brings in $5,000 of contribution margin for the company each month. The business currently manufactures these sleeping bags, but it's considering an option to outsource. The company's contribution margin will go down to $2,500 next month for the sleeping bags category if Tarr decides to purchase from the supply instead of manufacturing in-house. If he decides to buy instead of make, there will be available capacity for other products. By one estimate, $4,000 in new monthly contribution margin could be generated with that available space. Others believe that the estimated $4,000 new contribution margin is optimistic.
Using excel goal seek,
Determine how small the new contribution margin amount can be so that the "buy" option is equally attractive as the "make" option.
Horngrens Financial and Managerial Accounting
ISBN: 978-0133866292
5th edition
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura