Explanation 1. Analysis to determine whether Snow Ride should make or buy the bindings. Make decision Buying decision Direct materials $17,590 Buying price $24,700 Direct labor $3,200 Fixed cost $4,200 Variable overhead $2,080 Transportation cost per unit $3 $5,700 Fixed overhead $6,300 Adding Logo cost per unit $0.50 $950 Total manufacturing cost for 1,900 bindings $29,170 Total buying cost $35,550 Production cost per unit $15.35 Buying cost per unit $18.71 The decision of whether to make or buy the bindings of Snow Ride is based on the cost incurred in each alternative. The production cost per unit of making the bindings is $15.35 where the buying cost per unit of bindings is $18.71 and there is a difference of $6,380 in the total cost favoring make the binding decision. Higher the cost, lesser will be the profit and lower the cost, more will be the profit. Hence, Snow Ride should make the bindings instead of the buying it from Livingston...

Horngren S Accounting, The Financial Chapters, Student Value Edition

12th Edition

ISBN: 9780134490502

Author: MILLER-NOBLES, Tracie L.; Mattison, Brenda L.; Matsumura, Ella Mae

Publisher: PEARSON

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Question

Chapter 25, Problem P25.25APGA

To determine

Make or buy decision:

Making a decision, whether to manufacture or buy the product from another manufacture is called a make or buy decision. The decision is made based on cost incur on the product.

To determine:

1. The preparation of analysis to show whether Snow Ride should make or buy the bindings.

2. Which alternative makes the best use of Snow Ride’s facilities?

a. Make bindings.

b. Buy the bindings and leave facilities idle.

c. Buy bindings and make another product.

Expert Solution & Answer

Chapter 25 Solutions

Horngren S Accounting, The Financial Chapters, Student Value Edition

Ch. 25 - Prob. 1QC Ch. 25 - Prob. 2QC Ch. 25 - Which of the following costs are irrelevant to...Ch. 25 - Prob. 4QC Ch. 25 - Prob. 5QC Ch. 25 - 6. When companies are price-setters, their...Ch. 25 - Prob. 7QC Ch. 25 - Prob. 8QC Ch. 25 - Prob. 9QC Ch. 25 - Prob. 10QC

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