Miguel Company manufactures a part for its production cycle. The annual costs per unit for 5,000 units of the part are as follows: Per Unit Direct materials $3.00 Direct labor 5.00 Variable factory overhead 4.00 Fixed factory overhead 3.00 Total costs $15.00 The fixed factory overhead costs are unavoidable. Jimenez Company has offered to sell 5,000 units of the same part to Miguel Company for $14 per unit. The facilities currently used for the part could be used to make 5,000 units annually of a new product that would contribute $4 a unit to fixed expenses. No additional fixed costs would be incurred with the new product. Miguel Company should ________.
