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What colorado ski company should

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Reference no: EM132514903

Colorado Ski Company makes downhill ski equipment. Assume that New Mexico Ski Company has offered to produce ski poles for Colorado Ski Company for $18 per pair. Colorado Ski Company needs 100,000 pairs of poles per period. Colorado Ski Company can only avoid $125,000 of fixed costs if it outsources; the remaining fixed costs are unavoidable.

Colorado Ski Company currently has the following costs at a production level of 100,000 pairs of poles:

Manufacturing Costs                             Total Cost          Cost per Pair

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

Question 1: What Colorado Ski Company should:

Reference no: EM132514903

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