Q-8: Falcon Company manufactures a variety of stationery items among them a famous brand is highlighters. The company has just received an offer from an outside supplier to provide the ink cartridge for the company's highlighters, at a price of $4.80 per dozen cartridges. The company is interested in this offer, since its own production of cartridges is at full capacity. Falcon Company estimates that if the supplier's offer were accepted, the direct labor and variable manufacturing overhead costs of the highlighters line would be reduced by 10% and the direct materials cost would be reduced by 20%. Under present operations, Falcon Company manufactures all of its own highlighters from start to finish. The highlighters are sold through wholesalers at $50 per carton. Each carton contains one dozen highlighters. Fixed manufacturing overhead costs charged to the highlighters line total $250,000 each year. The present cost of producing one dozen highlighters markers (one box) is given below: Direct materials Direct labor Manufacturing overhead Total cost $15.00 10.00 8.00* $33.00 Note*: Cost of manufacturing overhead $ 8.00 includes both variable and fixed manufacturing overhead, based on production of 50,000 boxes of markers each year. Required: a) Should Falcon Company accept the outside supplier's offer? Show computations. b) What qualitative factors should Falcon Company consider in determining whether it should make or buy the ink cartridges