Doing More with Less

Lisa Adams
ACCT310: Unit 3 Individual Project
Professor Sharon Borowicz
Du Date 06/26/2011

The decision to perform a service in house or outsource to another country or just another company is referred to as a make versus buy decision. Make versus buy decisions use differential cost perspective and should cover more than one year of analysis. That being said, Ski Pro Corporation needs to decide whether to offer cross-country skis to supplement its sinter season revenue and if so whether to buy the bindings or make them in-house. In an effort to help the management with this decision, this document will offer a differential cost perspective and will explain Ski Pro Corporation choices. Please examine the excel document that was prepared alongside this document to see the figures and calculations preformed for this analysis.
Thank you for your consideration

Lisa Adams
Ski Pro Management

There are many pressures on a business to do more with less; one way to accomplish this is to outsource certain services at a significant cost savings to a business. This may be the case for Ski Pro Corporation; the included documents will determine whether to make bindings for the new product offering or to outsource the bindings. To determine these decisions a differential cost analysis has been prepared.
Understanding the steps to a differential cost analysis is essential to properly applying its information. Differential cost show how a decision will change a business’s costs; this is different than just comparing total costs of making in-house to the total cost of outsourcing. It takes into account variable costs and opportunity costs unlike a total cost look. Opportunity costs are the loss of opportunity in the use of an asset or resource other than its chosen alternative (MICHEL, 2004). An example of an opportunity cost would be the sale of a stadium by a city without looking at the added revenue of the concession stand and the parking revenue when...