Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,160 remotes is as follows:

CostDirect materials$ 66,040Direct labor$ 55,880Variable overhead$ 30,480Fixed overhead$ 50,800Total$ 203,200

1.Compute the difference in cost per unit between making and buying the remotes if none of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes?

2. Compute the difference in cost per unit between making and buying the remotes if $20,320 of the fixed costs can be avoided. What is the change in net income, if Frannie Fans buys the remotes?

3. What is the change in net income if fixed cost of $20,320 can be avoided and Frannie could rent out the factory space no longer in use for $20,320?

Frannie is approached by Lincoln Company, which offers to make the remotes for $18 per unit.