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The Ski Pro Corporation, which produces and sells to wholesalers…

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The Ski Pro Corporation, which...
The Ski Pro Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country skis.

After considerable research, a cross-country ski line has been developed. Because of the conservative nature of the company management, however, Minnetonka’s president has decided to introduce only one type of the new ski for this coming winter. If the product is a success, further expansion in future years will be initiated.

The ski selected is a mass-market ski with a special binding. It will be sold to wholesalers for $80 per pair. Because of availability capacity, no additional fixed charges will be incurred to produce the skis. A $100,000 fixed charge will be absorbed by the skis, however, to allocate a fair share of the company’s present fixed costs to the new product.

Using the estimated sales and production of 10,000 pairs of skis as the expected volume, the accounting department has developed the following cost per pair of skis and bindings:

Direct Labor: $35
Direct Material: $30
Total Overhead: $15
Total: $80

Ski Pro has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor would be $5.25 per binding, or $10.50 per pair. If the Ski Pro Corporation accepts the purchase proposal, it is predicted that direct-labor and variable-overhead costs would be reduced by 10% and direct-material costs would be reduced by 20%.

Write a 1–2 page paper, and create a spreadsheet that answers the following questions:

1.Should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.
2.What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings? Support your answer with an appropriate explanation.
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.
4.What qualitative factors (that is, issues with vendors, customers, or within the product itself) should the Ski Pro Corporation consider in determining whether they should make or buy the bindings? Due tomorrow
Submitted: 8 years ago.Category: Business and Finance Homework
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Answered in 4 minutes by:
6/27/2010
Business Tutor: Steve, MBA replied 8 years ago
Steve
Steve, MBA
Category: Business and Finance Homework
Satisfied Customers: 25,951
Experience: MBA
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hi thanks for requesting me, please give me a moment to look this over
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Business Tutor: Steve, MBA replied 8 years ago

Hi,

 

What time is this needed by tomorrow? What time zone. Also, can you please confirm that this was intended "FOR STEPHEN ONLY"

 

Thanks,

 

Steve

 

 

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Customer reply replied 8 years ago

yes this was FOR STEPHEN ONLY

 

I need it by tomorrow 8 pm est

 

do you think you can do this by then.

Business Tutor: Steve, MBA replied 8 years ago
No problem. I can get you both by then.
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Customer reply replied 8 years ago
thank yoi
Business Tutor: Steve, MBA replied 8 years ago

Hi,

 

Here is your answer.

 

Word doc:

 

http://www.box.net/index.php?rm=box_download_shared_file&file_id=f_457719126&shared_name=5i9s52fs4h

 

Excel:

 

http://www.box.net/index.php?rm=box_download_shared_file&file_id=f_457719124&shared_name=gsazymxquf

 

Let me know if you have questions. Please press accept if satisfied.

 

Cheers,

 

Steve

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Customer reply replied 8 years ago
do you have any references I can use. In addition can you take a look at my other questions
Business Tutor: Steve, MBA replied 8 years ago

Yes, you can use these:

 

 

Brewer, Garrison & Noreen, 2009. Managerial Accounting, 13th Edition. McGraw Hill, New York.

 

Smith & Smith, 2010. Business and Accouting Ethics. Retrieved June 13, 2010 from http://acct.tamu.edu/smith/ethics/ethics.htm



Edited by Stephen, MBA on 6/27/2010 at 10:19 PM EST
Steve
Steve, MBA
Category: Business and Finance Homework
Satisfied Customers: 25,951
Experience: MBA
Verified
Steve and 87 other Business and Finance Homework Specialists are ready to help you
Ask your own question now
Business Tutor: Steve, MBA replied 8 years ago
Hi thanks for tequesting me earlier. Please be sure to put "for stepehn only" at the start of your post when you do. Thanks! Steve
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