The Truck Division of Auto Incorporated has offered to purchase 170,000 brakes from the Brake Division for $80 per brake. At a normal volume of 500,000 brakes per year, production costs per brake for the Brake Division are as follows:

Direct Materials $26

Direct Labor 20

Variable Overhead 12

Fixed Overhead 30

Total $88

The Brake Division has been selling 500,000 brakes per year to outside buyers at $110 each. Capacity is 700,000 brakes per year. The Truck Division has been buying brakes from outside suppliers at $100 per wheel.

The Brake Division manager should accept the offer to sell to the Truck Division at $80 per brake. True or False?