Bryon Industries manufactures 21,800 components per year. The manufacturing cost of the components was determined as follows:
Direct materials $ 118,000
Direct labor 178,000
Variable manufacturing overhead 69,000
Fixed manufacturing overhead 89,000
An outside supplier has offered to sell the component for $26.00. If Bryon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $19,000. If Bryon purchases the component from the supplier instead of manufacturing it, the effect on income would be:
a $251,800 increase.
a $182,800 decrease.
a $213,800 decrease.
a $548,400 increase.