The Chat Company manufactures 2,500 telephones per year. The full manufacturing costs per telephone are as follows: Chat Company data Direct materials $ 4

Direct labor 16

Variable manufacturing overhead 12

Average fixed manufacturing overhead 10

Total $42

The Electric Assembly Company has offered to sell Chat 2,500 telephones for $34 per unit. If Chat accepts the offer, $20,000 of fixed overhead will be eliminated. Chat should:

a. Make the telephones; the savings is $5,000

b. Buy the telephones; the savings is $15,000

c. Buy the telephones; the savings is $20,000

d. Make the telephones; the savings is $15,000