The Textile Milling Company manufactures an intermediate product identified as Y3. Variable manufacturing costs per unit of Y3 are as follows:

Direct materials$2

Direct labor$7

Variable manufacturing overhead$5

Indigo Company has offered to sell Textile Milling 5,000 units of Y3 for $20 per unit. If Textile Milling accepts the offer, $25,000 of fixed manufacturing overhead will be eliminated.

Applying differential analysis to the situation, Textile Milling should

Select one:

A.make Y3; the savings is $5,000.

B.buy Y3; the savings is $50,000.

C.make Y3; the savings is $50,000.

D.buy Y3; the savings is $5,000.