1. 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
   Average fixed manufacturing overhead	12
   Total	$44

   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. Chateau should:

   Make the telephones; the savings is $4,000

   Buy the telephones; the savings is $35,000

   Buy the telephones; the savings is $24,000

   Make the telephones; the savings is $24,000