Wally World makes cross-country skis. Its manufacturing cost of 5,000 fixings is as follows: Direct materials $44,000
Question:
Wally World makes cross-country skis. Its manufacturing cost of 5,000 fixings is as follows:
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Wally World can purchase bindings from another manufacturer for $11.00 each. They would pay an additional $1.50 per unit to have the bindings shipped to their manufacturing plant. They would add their logo to each binding for an additional $0.70 per unit. If Wally World buys the bindings, they can avoid fixed overhead costs of $7,500.
Required
Should Wally World continue to make the bindings or buy them from the other manufacturer? Show detailed calculations to support your decision.
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118856994
4th Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly