Outdoor Life manufactures snowboards. Its cost of making 2,000 bindings is as follows:
Direct materials $17,550
Direct labor 3,400
Variable overhead 2,040
Fixed overhead 6,300
Total manufacturing cost for 2,000 bindings $29,290
Suppose Lancaster will sell bindings to Outdoor Life for $14 each. Outdoor Life would pay $3 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.
Outdoor Life’s accountants predict that purchasing the bindings from Lancaster