Harris Company uses 5,000 pounds of fondant each year. The cost of producing the fondant is as follows:

Direct materials	$50,000
Direct labour	70,000
Variable overhead	30,000
Fixed overhead	20,000
Total	$170,000

An outside supplier has offered to sell Harris Company unlimited quantities of fondant at a unit cost of $31.00. If Harris Company accepts this offer, it can eliminate 50 percent of the fixed costs assigned to the manufacture of fondant. Furthermore, the space devoted to the manufacture of the fondant would be rented to another company for $24,000 per year. If Harris Company accepts the offer of the outside supplier (i.e., if it buys the fondant), annual profits will

Select one:

a. increase by $2,500

b. increase by $22,000

c. increase by $29,000

d. increase by $14,500