1. Clear Sailing Lifeboats

   Clear Sailing Lifeboats uses 12,000 units of a certain component in production each year. Presently, this component is purchased from an outside supplier at $9.50 per unit. For some time now there has been idle capacity in the factory that could be utilized to make this component. The costs associated with manufacturing the component internally rather than buying it from the outside supplier are

   Direct materials	$3 per unit
   Direct Labor	$3 per unit
   Variable Overhead	$2 per unit
   Fixed Overhead (based on production of 8,000 units per month)	$2 per unit
   Annual salary if hiring a new supervisor to oversee this production	$12,000

   If the company chooses to make the component instead of buying it from an outside supplier, the changes in the company's net income per year would be a...

   	A.	$6,000 increase
   	B.	$6,000 decrease
   	C.	$8,400 decrease
   	D.	$8,4000 increase