ACTIVITY-BASED COSTING & PROCESS COSTING

Unit 3 - Activity-Based Costing & Process Costing



Unit 3 - Activity-Based Costing & Process Costing

Question 1

Should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer (Wild & Shaw, 2010).

Solution

Variable Overhead Costs:

Fixed O/H = $100,000

Fixed O/H Per pair = $100,000 / 10,000 = $10

Since Total OH = $15, therefore Variable OH Cost = $15 - $10 = $5

From the attached Calculations, it is better that the company makes the bindings since if they make the bindings, the contribution margin would be $10 per pair, while if the ...