P26-4B Smooth Sailing manufactures sailboats. Assume that Smooth Sailing's cost of mak- ing 1.200 seat covers is Direct materials Direct labor Variable overhead. Fixed overhead.. Total manufacturing costs for 1,200 seat covers $ 7.260 1.440 960 2.400 $12.060 Suppose Sof-Seatz will sell seat covers to Smooth Sailing for $8 each, Smooth Sailing would pay $0.90 per unit to transport the seat covers to its manufacturing plant, where it would add its own Smooth Sailing logo at a cost of $0.12 per seat cover. Required 1. Smooth Sailing's accountants predict that purchasing the seat covers from Sof-Seatz will enable the company to avoid $900 of fixed overhead. Prepare an analysis to show whether Smooth Sailing should make or buy the seat covers. 2. Assume that the Smooth Sailing facilities freed up by the purchase of seat covers from Sol-Seatz can be used to manufacture another product that will contribute $2.300 to profit. Total fixed costs will be the same as it Smooth Sailing had produced the seat cov- ets Prepare an analysis to show which alternative makes the best use of Smooth Sailing's facilities:

(a) make seat covers,

(b) buy seat covers and leave facilities idle, or

(c) buy seat covers and make another product.