Gateway manufactures 21,000 computers per year. Demand is flat so its expected production levels to remain consistent year over year. The full manufacturing costs per computer are as follows:

Direct materials $500

Direct labor 100

Variable manufacturing overhead 58

Variable Selling & Administrative 2

Average fixed manufacturing overhead 26

Total $686

Westlake College offers to buy 20,000 computers at $699 per computer. If Gateway accepts the offer, it will save 50% of its variable sales and administrative costs as a result. Gateway should:

a. Accept the offer, the savings is $780,000

b. Reject the offer, the loss is $266,000

c. Accept the offer, the savings is $280,000

c. Accept the offer; the savings is $800,000

d.