A company produces 100 microwave ovens permonth, each of which includes one electrical circuit. The company currently manufactures circuit inhouse but is considering outsourcing the circuits at a contract price of$28 each.Currently, the cost of producing circuits inhouse includes variable costs of$26 per circuit and fixed costs of$5,000 per month.

Assume the company could cut fixed costs in half byout sourcing, and that there is no alternative use for the facilities presently being used to make circuits. How will it affect monthly operatingincome, if the companyout sources?

A. Operating income will go down by $200

B. Operating income will stay the same

C. Operating income will go down by $2,800

D. Operating income will go up by $2,300