ABC, Inc. has an outsourcing option available for one of their widgets. They have determined that the avoidable cost is $150 per widget and that, if they stop
production, the unused space can be rented for $100,000 per year. ABC currently produces 5,000 of the widgets per year. If the outsourcing price is $175 per
widget, ABC should
$\text{O}$ accept the outsourcing offer because profits will increase by $100,000
$\text{O}$ accept the outsourcing offer because profits will increase by $75,000
$\text{O}$ reject the outsourcing offer because profits will decrease by $125,000
$\text{O}$ reject the outsourcing offer because profits will decrease by $25,000