Chelsea Company manufactures a computer component. Currently, the cost per unit consists of Direct materials at P20; direct labor costs at P200; variable overhead at P100; and fixed overhead at P160. Adrian company approached Chelsea with an offer to sell 4,000 units of the component for P440 per unit. If Chelsea accepts the proposal, P1,000,000 of the fixed overhead will be eliminated. Should Chelsea, make or buy the component? How much will be saved?

5 points