ACCT310 Unit 3 GP - Activity-Based Costing & Process Costing

Subcontractor rather than manufacture the bindings in

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subcontractor rather than manufacture the bindings in-house Ski Pro Corporation would lose $0.50 per pair of bindings, when multiplied by 10,000 that loss would be $5,000.00. The maximum purchase price that is acceptable for Ski Pro Corporation should be any price that is equivalent to their in-house processing price or lower. On the other hand if Ski Pro Corporation were to produce 12,500 based on the revised estimates, additional equipment is required and comes with an annual rental price tag of $10,000
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ACTIVITY-BASED COST (additional fixed cost) the in-house cost to produce the bindings now becomes $10.80 per pair. With that being said, it is at that point that it would be beneficial for Ski Pro Corporation to purchase the bindings from subcontractor rather than producing them in-house. The difference in costs is a net savings of $3,750 because the subcontractor is offering to make the bindings at $10.50 per pair for orders in excess of 10,000. The qualitative factors that Ski Pro Corporation must consider when determining whether
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  • Spring '12
  • James
  • Ski binding, Ski Pro Corporation

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