Elsie Inc. operates an outstanding caf in the Bloor West Village and makes their own pastries. The company has an option to buy their pastries from a local operation instead of making them. Duffels Ltd. has offered to sell the pastry to Elsie Inc. for $11.00 each. Elsie Inc. has the following information about their operations: Annual production 3500 units Production costs per unit: Direct materials $6.00 Direct labour $2.00 $1.50 $3.50 $13.00 Variable overhead Fixed overhead Total Fixed overhead is allocated to products based on the annual production. If Elsie Inc. were to purchase their pastries from Duffels Ltd. a total of $7,700 of fixed overhead would be avoided. The remaining fixed overhead is common fixed overhead and would not be impacted.