Pear Company manufactures 5,000 telephones per year. The full manufacturing costs per telephone are as follows:

Direct Material $2

Direct Labor $8

Variable Manufacturing Overhead $5

Average fixed manufacturing overhead $5

Total: $20

Phony USA has offered to sell Pear Company 5,000 telephones for $20 per unit. If Pear Company accepts the offer, $12,500 of fixed overhead will be eliminated.

Applying differential analysis to the situation, should Pear Company make or buy the phones?