The Ski Pro Corporation Perfect answer

# The Ski Pro Corporation Perfect answer - 1.Should the Ski...

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1.Should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer. Solve for Variable Overhead per ski. They are tricky here - they give you enough data to compute the allocated fixed costs of \$100,000 / 10,000 skis = \$10 per ski so \$15 - \$10 = \$5 VOH per ski Total saved if buy: DM \$30 x .2 =\$6.00 DL \$35 x .1 = \$3.50 VOH \$5 x .1 = \$0.50 Total saved = \$10.00 So, they would save \$10 if they stopped doing it but that would be replaced with \$10.50 to buy it. Overall profits would go down \$.50 per binding. 2.What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings? Support your answer with an appropriate explanation. The maximum purchase price would be the amount saved by buying -- \$10.00 - so that they are not any worse off for having purchased it outside. We ignore anything that won't change between alternatives (such as total common fixed costs). It is isn't allocated here, it has to be allocated somewhere else!

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3.Instead of sales of 10,000 pairs of skis, revised estimates show sales volume at 12,500
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## This note was uploaded on 02/24/2012 for the course ECONOMICS ECON 312 taught by Professor Day during the Spring '10 term at DeVry Phoenix.

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The Ski Pro Corporation Perfect answer - 1.Should the Ski...

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