1.Should the Watson Corporation make or buy the bindings? Show calculations to support your answer.

2.What would be the maximum purchase price acceptable to Watson Corporation for the bindings? Support your answer with an appropriate explanation.

3.Instead of sales of 10,000 pairs of skis, revised estimates show sales volume at 12,500 pairs. At this new volume, additional equipment, at an annual rental of RM10,00, must be acquired to manufacture the bindings. This incremental cost would be the only additional fixed cost required, even if sales increased to 30,000 pairs. (The 30,000 level is the goal for the 3rd year of production.) Under these circumstances, should the Watson Corporation make or buy the bindings? Show calculations to support your answer.

4.The company has the option of making and buying at the same time. What would be your answer to No.3 if this alternative were considered? Show calculations to support your answer.