22. For its relevant range of production and sales, the In & Out Corporation (hereafter "I&O") has the following cost behavior for its only product - Home Doors. (These costs are based on an annual sales volume of 5,000 home doors. Doors are sold to various home improvement stores for $150/door). Variable costs of production Variable costs of sales and administration Fixed building costs Fixed costs of sales and administration $75 per unit $20 per unit $ 75,000 per year 375,000 (00,000 - $ 50,000 per year Total costs A foreign company has offered to sell similar doors to I& for $ 95 a piece. If I&O buys the doors from the foreign company, I&O will no longer manufacturer its own doors, but instead will buy the doors from the foreign manufacturer for $ 95 per door and then resell them for $150 per door. In addition, the foreign manufacture has offered to pay I&O $110,000 a year for use of its building. If In & Out accepts the foreign company's offer, its net income will change by how much? A. $85,000 [an increase in net income] B. $ 10,000 [an increase in net income] C. ($ 25,000) [a decrease in net income] D. ($ 100,000) [a decrease in net income] E. None of the above answers can be determined as correct. -475,000 +110,000 -365,000 23. Mississippi Transmission (MT) produces standard transmissions for automobiles. Each transmission requires a special "main" seal that prevents transmission fluid from escaping. The company has historically produced these seals in-house, but has been approached by a vendor who has offered to supply the seals for $5 each. MT estimates its variable production cost per seal is $3 and its fixed production costs are $200,000 per year. Of the fixed production costs, $60,000 would no longer be incurred if the firm ceased production of the seals. If the firm requires 50,000 seals per year and purchased the seals, it annual profits would: A. increase by $ 140,000 B. increase by $ 100,000 C. decrease by $ 40,000 D. decrease by $ 100,000 E. None of the above answers can be determined as correct