Clemson Corp. makes 27,000 units of a certain component each year for use in one of its products. The cost per unit for the component at this level of activity is as follows: Direct Materiais $4.20 Direct Labour $12 Variable Manufacturing Overhead $5.80 Fixed Manufacturing Overhead $6.50 Clemson has received an offer from an outside supplier that is willing to provide 27.000 units of this component each year at a price of $25 per component. Assume that direct labour is a variable cost. and the facilities now being used to manufacture this component would be rented to another company for $64.800 per year. It would also avoid $35,100 of annual fixed manufacturing overhead. 1. Assume that there is no other use for the capacity now being used to produce the component, and the total fixed manufacturing overhead of the company would not be affected by this decision. If Clemson Company were to purchase the components rather than making them internally, what would be the impact on the company's annual operating income? a. $81.000 decrease. b. $94,500 increase c. $124.000 increase d. $237,600 decrease 2. Assume that if the components were to be purchased from the outside supplier, $35,100 of annual fixed manufacturing overhead would be avoided, and the facilities now being used to make the component would be rented to another company for $64.800 per year. If Clemson chooses to buy the component from the outside supplier under these circumstances, what would be the impact on annual operating income due to accepting the offer? a. $18,900 increase. b. $18,900 decrease. c. $21,400 increase. d. $21,400 decrease Cortland Inc. has 1,000 obsolete axles that are carried in inventory at a manufacturing cost of $20,000. If the axles are re-machined for $5,000, they could be sold for $9,000. Alternatively, the axles could be sold for scrap for $1,000. Which alternative is more desirable, and what are the total relevant costs for that alternative? a. Re-machine and $5,000. b. Re-machine and $25,000 C. Scrap and $20,000 d. Scrap and $19,000