Part 2

Wally World manufactures cross country skis. Its cost of manufacturing 5,000 bindings is as follows:

Direct materials	$44,000
Direct labor	8,500
Variable overhead	5,000
Fixed overhead	16,000
Total manufacturing costs for 5,000 bindings	$73,500

Wally World can purchase bindings from another manufacturer for $11.00 each. They would pay an additional $1.25 per unit to have the bindings shipped to its manufacturing plant. They would add their logo to each binding for an additional $0.70 per unit. If Wally World purchases the bindings they can avoid fixed overhead costs of $7,500.

Required

Should Wally World continue to manufacture the bindings or purchase them from the other manufacturer? Show detailed calculations to support your decision.