Diamond Brands currently makes rolls for deli sandwiches it produces. Sanders Company has approached Diamond Brands with a proposal to sell the rolls at a price of $22,000 for 20,000 pounds. The following costs are associated with production of 20,000 pounds of rolls:

Direct material $13,000

Direct labor 5,000

Manufacturing overhead 7,000

Total $25,000

The manufacturing overhead consists of $3,000 of variable costs with the balance being allocated to fixed costs. Should Diamond Brands make or buy the rolls?

		Buy the rolls to save $3,000.
		Continue to make the rolls because the incremental cost of buying is $2,000.
		Buy them to save $1,000.
		Continue to make the rolls because the incremental cost of buying is $22,000.
		Continue to make the rolls because the incremental cost of buying is $1,000