Frederick Co. is thinking about having one of its products manufactured by an outside supplier. Currently, the cost of manufacturing 5,000 units is:

Direct material	$	62,000
Direct labor		47,000
Variable factory overhead		38,000
Factory overhead		52,000

If Frederick can buy 5,000 units from an outside supplier for $130,000, it should:

• Make the product because the cost of direct material plus direct labor of manufacturing is less than $130,000.

• Make the product because factory overhead is a sunk cost.

• Buy the product because the total incremental costs of manufacturing are greater than $130,000.

• Buy the product because total fixed and variable manufacturing costs are greater than $130,000.

• Make the product because current factory overhead is less than $130,000.