The Chateau Company manufactures 4,000 telephones per year. The full manufacturing costs per telephone are as follows:

Direct materials	$ 4
Direct labor	16
Variable manufacturing overhead	12

The Quick Assembly Company has offered to sell Chateau 4,000 telephones for $31 per unit. If Chateau accepts the offer, $20,000 of fixed overhead will be eliminated.

		Buy the telephones; the savings is $24,000
		Make the telephones; the savings is $4,000
		Buy the telephones; the savings is $35,000
		Make the telephones; the savings is $24,000