Gateway manufactures 21,000 computers per year. Demand is flat so its expected production levels to remain consistent year over year. The full manufacturing costs per computer are as follows:

Direct materials $500

Direct labor 100

Variable manufacturing overhead 58

Variable Selling & Administrative 2

Average fixed manufacturing overhead 26

Total $686

Gateways Product Group team has proposed to produce the computers in bright colors. This further processing will add $15 to the total cost but selling price would improve to $899. What should Gateway do?

a. Manufacture the computers as is as further processing will result in a net loss of $4

b. Manufacture the computers as is as further processing will result in a net loss of $2

c. Manufacture the computers in bright colors as it will result in a net profit of $4

d. Manufacture the computers in bright colors as it will result in a net profit of $2