Krass Snowboard Mfg. Inc. manufactures snowboards. Its cost of making 3,500 bindings is as follows:

Suppose O'Brien will sell bindings to Krass for $15 each. Krass will pay $1.50 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.80 per binding. Krass' accountants predict that purchasing the bindings from O'Brien will enable the company to avoid $5,500 of fixed overhead. The facilities freed by purchasing bindings from O'Brien can be used to manufacture another product that will contribute $6,500 to profit. Total fixed costs will be the same as if Krass had produced the bindings. Show which alternative makes the best use of Krass' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.

Question

Krass Snowboard Mfg. Inc. manufactures snowboards. Its cost of making 3,500 bindings is as follows:
  
Suppose O'Brien will sell bindings to Krass for $15 each. Krass will pay $1.50 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.80 per binding. Krass' accountants predict that purchasing the bindings from O'Brien will enable the company to avoid $5,500 of fixed overhead. The facilities freed by purchasing bindings from O'Brien can be used to manufacture another product that will contribute $6,500 to profit. Total fixed costs will be the same as if Krass had produced the bindings. Show which alternative makes the best use of Krass' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.

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The Answer of Krass Snowboard Mfg. Inc. manufactures snowboards. Its cost of making 3,500 bindings is as follows:
  
Suppose O'Brien will sell bindings to Krass for $15 each. Krass will pay $1.50 per unit to transport the bindings to its manufacturing plant, where it will add its own logo at a cost of $0.80 per binding. Krass' accountants predict that purchasing the bindings from O'Brien will enable the company to avoid $5,500 of fixed overhead. The facilities freed by purchasing bindings from O'Brien can be used to manufacture another product that will contribute $6,500 to profit. Total fixed costs will be the same as if Krass had produced the bindings. Show which alternative makes the best use of Krass' facilities: (a) make bindings, (b) buy bindings and leave facilities idle, or (c) buy bindings and make another product.