Cheesy, Inc., produces ravioli and tortellini. Management estimates that Cheesy will use 10,000 pounds of cheese filling each month. The costs associated with each pound of filling include $5.32 of direct materials, $7.48 of direct labor, $7.30 of variable overhead. Cheesys monthly fixed overhead of $2,500 cannot be eliminated if Cheesy outsources its pasta production. Pasta Specialties has offered to supply 10,000 pounds of cheese filling each month for $20 per pound. Should Cheesy accept the offer to buy cheese filling?

A :

No, because it will save $2,500 per month by producing the filling.

B :

Yes, because it will save $1,000 per month by outsourcing the filling.

C :

Yes, because it will save $2,500 per month by outsourcing the filling.

D :

Yes, because it will save $3,500 per month by outsourcing the filling.