Janeiro Skate, Inc. currently manufactures the wheels that it uses for its in-line skates. The annual costs to manufacture the 150,000 wheels needed each year are as follows:

		Total Cost
	Direct materials	$165,000
	Direct labor	45,000
	Variable manufacturing overhead	60,000
	Fixed manufacturing overhead	300,000
	Total	$570,000

Kasba Rubber Company has offered to provide Janeiro with all of its annual wheel needs for $3.50 per wheel. If Janeiro accepts this offer, 75% of the fixed manufacturing overhead above could be totally eliminated. Also, Janeiro would be able to rent out the freed up space and could generate $72,000 of income annually. Assume that direct labor is a variable cost.

Required:

Based on this information, would Janeiro be financially better off to continue making the wheels or to buy them from Kasba?