Frannie Fans currently manufactures ceiling fans that include remotes to operate them. The current cost to manufacture 10,100 remotes is as follows:

	Cost
Direct materials	$ 65,650
Direct labor	$ 55,550
Variable overhead	$ 30,300
Fixed overhead	$ 50,500
Total	$ 202,000

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

Required:

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 $20,200 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 $20,200 can be avoided and Frannie could rent out the factory space no longer in use for $20,200?