1. Should the Ski Pro Corporation make or buy the bindings?-Name:
A. First calculate the cost savings of purchasing bindings:
Material (for skis & binding)a
Labor (for skis & binding)
Overhead (figure out the variable overhead cost first, calc below)**
Total cost save by purchasing the bindings (cost to make the bindings)
Cost to purchase per unit -figure given in scenario
Compare the per unit cost to buy vs. the per unit savings to buy
Indicate whether the company should make or buy the bindings
**Overhead calculation to the bindings
2. What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings?
3. Instead of sales of 10,000 pairs of skis, revised estimates show sales volume at 12,500 pairs. At this new volume, additional equipment,
at an annual rental of $10,000 must be acquired to manufacture the bindings. This incremental cost would be the only additional fixed cost
required even if sales increased to 30,000 pairs. (This 30,000 level is the goal for the third year of production.) Under these circumstances,
should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.
The cost of making 12,500 pair is:
Cost to make ski bindings
Added fixed costs related to the add’l equipment
Total cost to make ski bindings
Cost of buying 12,500 pairs of skis
Cost of making 12,500 pairs of skis
Buying/making the bindings will save
Indicate if it is cheaper to make or buy the bindings
4. What Qualitative factors should the Ski Pro Corporation consider in determining whether they should make or buy the bindings?