Cheesy, inc., produces ravioli and tortellini. management estimates that cheesy will use 10,000 pounds of cheese filling each month. the costs associated with each pound of filling include $5.32 of direct materials, $7.48 of direct labor, $7.30 of variable overhead. cheesy’s monthly fixed overhead of $2,500 cannot be eliminated if cheesy outsources its pasta production. pasta specialties has offered to supply 10,000 pounds of cheese filling each month for $20 per pound. should cheesy accept the offer to buy cheese filling?
a. no, because it will save $2,500 per month by producing the filling.
b. yes, because it will save $1,000 per month by outsourcing the filling.
c. yes, because it will save $2,500 per month by outsourcing the filling.
d. yes, because it will save $3,500 per month by outsourcing the filling.