Motor Company manufactures 10,000 units of Part M-l each year for use in its production. The following total costs were reported last year:

Valve Company has offered to sell Motor 10,000 units of Part M-l for $18 per unit. If Motor accepts the offer, some of the facilities presently used to manufacture Part M-l could be rented to a third party at an annual rental of $15,000. Additionally, $4 per unit of the fixed overhead applied to Part M-l would be totally eliminated. Should Motor Company accept Valve Company's offer, and why?
a. Yes, because it would be $25,000 cheaper to buy the part.
b. No, because it would be $15,000 cheaper to make the part.
c. Yes, because it would be $10,000 cheaper to buy the part.
d. No, because it would be $5,000 cheaper to make thepart.

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Direct materials Direct labor.... Variable manufacturing overhead. $ 20,000 55,000 45,000 70,000 $190,000 Fixed manufacturing overhead Total manufacturing cost