BakeSake Company makes cakes. The costs per unit for 5,000 units of cake is as follows:

Direct materials $15,000

Direct labour 25,000

Variable manufacture overhead 20,000

Fixed manufacture overhead 10,000

Total costs $70,000

The fixed factory overhead costs are unavoidable.

Assume that BakeSake Company has been offered 5,000 units of cake from another producer for $15 each. The facilities currently used to make the cakes could be rented out to another manufacturer for $20,000 a year. BakeSake Company should:

Select one:

a. buy the cakes as that would save $15,000

b. make the cakes as that would save $15,000

c. buy the cakes as that would save $5,000

d. make the cakes as that would save $5,000