Body Care, Inc., produces skin lotion. Chemical XX2 is an ingredient of that skin lotion. Body Care, Inc., currently produces Chemical XX2 in its own factory. The Cindy Company offers to supply Chemical XX2 at a price of $200 per 100 units. An analysis of the costs that Body Care incurs producing Chemical XX2 reveals the following information:
Cost per 100 Units
Direct (Variable) Material ............................................................................ $100
Direct (Variable) Labor .................................................................................... 50
Other Variable Costs ........................................................................................ 25
Fixed Costs per 100 Unitsa ......................................................................... 50
Total ............................................................................................................. $225
a These fixed costs would still be incurred by Body Care, Inc. if Chemical XX2 is purchased from Cindy Company.

Management of Body Care, Inc., needs your advice in answering the following questions:
a. Should Body Care, Inc., accept the offer from Cindy?
b. Should the offer be accepted if Cindy reduces the price to $160 per 100 units?