Henderson Manufacturing Inc. manufactures electric scooters. The company currently makes all of the electronic components for the scooter itself. When 6,000 motors are manufactured each year, the motor costs per unit are as follows:

Direct materials $3

Direct labor 4

Variable overhead 5

Fixed overhead 8

Plymouth Inc. has offered to sell Henderson 6,000 motors for $15 per unit. If Henderson accepts the offer, Henderson can (1) rent the motor part of its factory for $10,000 and (2) avoid 60% of the fixed overhead.

23.If Henderson accepts the offer to purchase 6,000 motors from Plymouth, net income will:

a. decrease by $11,200.

b. increase by $20,800.

c. decrease by $20,800.

d. increase by $11,200.