Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools. Hurley Division produces a steel handle used in three different tools. The budget for these handles is 120,000 units with the following unit cost.

Direct material $ 0.80

Direct labor 0.60

Variable overhead 0.20

Fixed overhead 0.30

Total unit cost $ 1.90

Ironwood Division purchases 22,000 handles from Hurley Division and completes the hand tools. An outside supplier, R & M Steel, has offered to supply 22,000 units of the handle to Ironwood Division for $1.775 per unit. Hurley currently has idle capacity that cannot be used.

What is the cost impact to Cohasset as a whole of purchasing from R & M Steel?

A-decrease the handle unit cost by $0.125.

B-increase the handle unit cost by $0.125.

C-increase the handle unit cost by $0.175.

D-decrease the handle unit cost by $0.175.