Hans Inc. sells citrus fruit from its website. Protecting the fruit during shipping is critical to the companys success. Accordingly, Hans Inc fabricates its own shipping containers. Hans Inc ships 2,000,000 containers of fruit annually. Total costs to fabricate that many containers are provided below:

Volume	2,000,000 containers
Direct materials	$520,000
Direct labor	$960,000
Variable overhead	$1,200,000
Fixed overhead	$750,000
Total	$ 3,430,000

A major paper products company has offered to supply all of the containers that Hans Inc needs at a price of $1.80 per container. What will be the effect on pretax income if Hans Inc accepts this offer?

Select one:

a.

Reduction in pretax income of $2,680,000.

b.

Increase in pretax income of $520,000.

c.

Reduction in pretax income of $520,000.

d.

Reduction in pretax income of $920,000.