Company is presently making a light that is used as a component in one of its products. Annual required production is 40,000 units. The unit product costs for the light are:

Direct materials ................................................. $ 6

Direct labour ...................................................... 3

Variable manufacturing overhead ......................... 1

Supervisors salary ............................................. 1

General factory overhead 2

Total unit product cost .................................. $13

An external supplier has offered to supply this component for $15 each. If the offer is accepted, Glow will save the supervisors salary and save 25% of the general factory overhead.

Required: Should this offer be accepted? Show calculations to support your answer.