Add/Drop The management of Heider Corporation is considering dropping product J14V. Data from the company's accounting system appear below: Sales $920,000 Variable expenses $377,000 Fixed manufacturing expenses $359,000 Fixed selling and administrative expenses $239,000 In the company's accounting system all fixed expenses of the company are fully allocated to products. Further investigation has revealed that $211,000 of the fixed manufacturing expenses and $172,000 of the fixed selling and administrative expenses are avoidable if product J1 4V is discontinued. What would be the effect on the company's overall net operating income if product J14V were dropped? (Answer: decrease by $160,000) Make/Buy Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows: Direct materials $0.2 Direct labor 0.3 Variable manufacturing overhead 0.15 Fixed manufacturing overhead 0.35 Total $1 An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year. If Talboe chooses to buy the wheel from the outside supplier, how would that affect the company's annual net operating income? (Answer: increase by $50,000)