Spahr Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 5,000 units, are as follows:
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Direct materials
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$2.00
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Direct labor
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$4.00
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Variable manufacturing overhead
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$3.00
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Fixed manufacturing overhead
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$3.00
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Total cost
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$12.00
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The fixed overhead costs are unavoidable.
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Erickson Company has offered to sell 5,000 units of the same part to Spahr Company for $11 per unit. Assuming the company has no other use for its facilities, what should Spahr Company do?