(10 pts) 6. SpoSnow Co. manufactures snowboards. Its cost of making 2,000 bindings is as follows:

Direct material	$20,000
Direct labor	4,000
Variable overhead	2,500
Fixed overhead	6,500
Total manufacturing cost for 1,800 bindings	$33,000

Suppose Crain Co. will sell bindings to SpoSnow for $14 each. SpoSnow would pay $2 per unit to transport the bindings to its manufacturing plant, where it would add its own logo at a cost of $0.70 per binding.

Required:

SpoSnows accountants predict that purchasing the bindings from Crain Co. will enable the company to avoid $2,500 of fixed overhead. Prepare an analysis to show whether SpoSnow should make or buy the bindings.

The facilities freed by purchasing bindings from Crain Co. can be used to manufacture another product that will contribute $5,000 to profit. Total fixed costs will be the same as if SpoSnow had produced the bindings. Show which alternative makes the best use of SpoSnow facilities: a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.