Jackson Company manufactures 20,000 components per year. The manufacturing cost of the components was determined

as follows:

Direct materials

$150,000

Direct labor

$120,000

Variable overhead

$80,000

Fixed overhead

$100,000

An outside supplier has offered to sell Jackson the component for $19. If Jackson purchases the component from the outside supplier, fixed costs would be reduced by $10,000. The manufacturing facilities would be unused and could be rented out for $10,000. Should Jackson accept the offer?

Yes, because the differential costs decrease by $30,000.

No, because the differential costs increase by $30,000.

No, because the differential costs increase by $10,000.

Yes, because the differential costs decrease by $10,000.

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