PEXTOL Ltd cost estimates for the manufacture of a sub assembly component is based on an annual production of 8,000 units.

DescriptionPer unitTotal

Direct materials $5$40,000

Direct Labor$4$32,000

Variable factory overhead applied $4$32,000

Fixed factory overhead applied

(150% of direct labor cost) $6$48,000

TOTAL$19$152,000

The supplier has offered to provide the sub-assembly at a price of $16 each.Two-thirds of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision.What action should the company take.