Robinson Company is evaluating the make or buy decision in regard to making the wheels for its skateboards internally. The currently manufactured wheels have a variable unit cost of $3. Fixed costs are $20,000 per month, however, 25% can be eliminated if wheels are no longer produced. A supplier has offered to produce this part for $4 per wheel and can produce the 4,000 wheels for the 1000 skateboards needed monthly. Should Robinson outsource wheels or make them internally?

Outsource because the incremental cost savings is $4,000.

Outsource because the incremental cost savings is $1000.

Outsource because the incremental cost savings is $3,200.

Make the product because the incremental cost savings is $4,000.