Make-buy

George INC manufactures parts for hats. The CEO is considering an offer from a subcontractor who would provide 2,800 units of cloth for a price of $190,000 (these are extremely nice hats). If George INC does not purchase these parts from the subcontractor it must produce them in-house with the following costs:

Direct Materials $22

Direct Labor 18

Variable Overhead 14

Allocated Fixed Factory Overhead 16

Allocated Fixed Selling Costs 5

Total Cost $75

If George INC produces the part, there would also be incremental fixed costs of $13,000 per period. Should George INC accept the offer from the subcontractor?

(please show workout)