Question: The following costs are incurred by Garrett Manufacturing when producing 150,000 units:
Variable costs $700,000
Fixed costs 900,000
An outside supplier has offered to make the item at $5.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $170,000. The net increase (decrease) in the net income of accepting the supplier's offer is
$ 45,000
$775,000
$125,000
$75,000