1. Hojnik Inc produces part ABC used in several of its engine models. Monthly production costs for 1,000 units are as follows:

   Direct materials $42,000

   Direct labour 10,500

   Variable overhead costs 32,500

   Fixed overhead costs 18,000

   Total costs $103,000

   It is estimated that 6% of the fixed overhead costs assigned to ABC will no longer be incurred if the company purchases ABC from the outside supplier. Hojnik Inc. has the option of purchasing the part from an outside supplier at $94.75 per unit.

   If Hojnik Inc. purchases 1,000 ABC parts from the outside supplier per month, then its monthly operating income will ________. (Round any intermediary calculations and your final answer to the nearest cent.)

   		decrease by $21,330
   		decrease by $8,670
   		increase by $21,330
   		increase by $8,670