Problem:
Toms Company makes and uses 20,000 units of a component part each year to produce a product. Costs for the component part include $4 for direct materials, $10 for direct labor, $6 for variable factory overhead, and $8 for unavoidable fixed factory overhead. Toms is considering an offer from a reputable outside supplier to provide the needed units for $24 per part.
Should Toms company accept the offer? (Yes or No), why or why not?