BOM is a Victorian manufacturing company. It uses part A75 in one of its products. The company's Accounting Department reports the following costs of producing 20 000 units of the part that are needed every year.

	Per unit
Direct materials	$0.80
Direct labour	$1.15
Variable overhead	$1.65
Supervisor's salary	$4.00
Depreciation of special equipment	$2.30
Allocated general overhead	$1.80
Total unit cost	$11.70

An outside supplier has offered to make the part and sell it to the company for $10.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labour, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer was accepted, only $22,400 of these allocated general overhead costs would be avoided.

Required:

Prepare a report that shows the effect on the company's total net operating income of buying part A75 from the supplier rather than continuing to make it inside the company and explain your decision. Show all relevant computations.