A)Wood Chuck Furniture currently manufactures rocking chairs as its main product. Each chair uses one seat cushion and one back cushion with the following costs per set of cushions (one seat and one back):

Direct materials$1

Direct labor10

Variable overhead5

Fixed overhead8

Total$24

Shepert Company has contacted Wood Chuck with an offer to sell it 5,000 sets of cushions for $18 each. If Wood Chuck buys the cushions, $2 of the fixed overhead per unit will be allocated to other products.

Instructions

Should Wood Chuck make or buy the cushions? Show calculations.

Note: please explain in detailed how to get the answer