25) Gamma Inc. incurs the following costs to produce 8,000 units of a subcomponent:

Direct materials $9,300

Direct labor 12,000

Variable overhead 10,500

Fixed overhead 17,000

An outside supplier has offered to sell Gamma the subcomponent for $3.85 a unit. Assume Gamma could avoid $3,500 of fixed overhead by accepting the offer.

Gamma should ________ (accept / reject) the offer because net income would increase / (decrease) by _______.

accept / $21,000 increase

accept / $6,750 increase

reject / ($4,500) decrease

accept / $4,500 increase