Rossignol makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Rossignol for $18 per pair. Rossignol needs 100,000 pairs of poles per period. Rossignol can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Rossignol currently has the following costs at a production level of 100,000 pairs of poles:Manufacturing CostsTotal CostCost per pair (100,000 pairs)Direct Materials$750,000$7.50Direct Labor80,0000.80Variable MOH520,0005.20Fixed MOH650,0006.50Total$2,000,000$20.00 1. Should Rossignol outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Rossignol's operating income?2. If the freed capacity could be used to produce ski boots that would provide $500,000 of operating income, should Rossignol outsource ski pole production?

The decision to make or purchase is critical for optimizing resource allocation, lowering costs, and…

nol makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Rossignol for $18 per pair. Rossignol needs 100,000 pairs of poles per period. Rossignol can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Rossignol currently has the following costs at a production level of 100,000 pairs of poles: Manufacturing Costs Total Cost Cost per pair (100,000 pairs) Direct Materials $750

nol makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Rossignol for $18 per pair. Rossignol needs 100,000 pairs of poles per period. Rossignol can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Rossignol currently has the following costs at a production level of 100,000 pairs of poles: Manufacturing Costs Total Cost Cost per pair (100,000 pairs) Direct Materials $750

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter10: Short-term Decision Making

Section: Chapter Questions

Problem 4EB: Dimitri Designs has capacity to produce 30,000 desk chairs per year and is currently selling all...

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Rossignol makes downhill ski equipment. Assume that Atomic has offered to produce ski poles for Rossignol for $18 per pair. Rossignol needs 100,000 pairs of poles per period. Rossignol can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable. Rossignol currently has the following costs at a production level of 100,000 pairs of poles:

Manufacturing Costs	Total Cost	Cost per pair (100,000 pairs)
Direct Materials	$750,000	$7.50
Direct Labor	80,000	0.80
Variable MOH	520,000	5.20
Fixed MOH	650,000	6.50
Total	$2,000,000	$20.00

1. Should Rossignol outsource ski pole production if the next best use of the freed capacity is to leave it idle? What effect will outsourcing have on Rossignol's operating income?
2. If the freed capacity could be used to produce ski boots that would provide $500,000 of operating income, should Rossignol outsource ski pole production?

Definition Definition Total cost of procuring or producing a product or the cost that an individual or business owner undertakes for the manufacturing of goods.

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