40 3 Spider Fish Desk Corporation manufactures and sells desks that are designed primarily for the young teenager market. The company manufactures all of the parts for the desks, but they have been considering the possibility of purchasing some of the component parts instead. In particular, they are negotiating with an outside supplier to manufacture and supply the pull-out keyboard trays that are installed in every desk. Spider Fish Desk Corporation's cost accountants have been preparing some analyses and have determine that the costs of producing the 7,400 keyboard trays needed each year are as follows: points Per Unit 01:20:25 Direct materials Direct labor Variable overhead Supervisor's salary $ 8.10 $ 4.40 $ 8.60 $ 3.20 Depreciation of equipment that manufacturers the trays Allocated general overhead $ 2.60 $ 1.30 As part of their negotiations, they have learned that another manufacturing company, Bell Tray, Inc., will make the keyboard trays and sell them to Spider Fish Desk Corporation for $27.60 each. If Spider Desk agreed to this contract, they could avoid the salary for the supervisor of the Keyboard Tray Department and all of the variable costs for that department, including direct labor. The equipment that is used to make the keyboard trays is very outdated and could not be used for any other purpose or sold. Spider Fish Desk allocates its general overhead (fixed costs) to all of the departments in the company. If the company enters into the contract with Bell Tray, Inc, they could avoid $4,100 of these allocated costs. As another point to consider, Spider Fish Desk could use the factory space that would be freed up to manufacture more of their most popular desks, which would increase the segment margin by $15,000 per year for those desks. Required: a. If Spider Fish Desk enters into the contract with Bell Tray, Inc. what would be the financial advantage (or disadvantage) per year to the company? Annual financial advantage (or disadvantage) would be b. How would you advise the company? Should Spider Fish Desk continue to make the keyboard trays themselves or should they buy them from Bell Tray, Inc.? The company should the keyboard trays.