King City Specialty Bikes (KCSB) produces high-end bicycles. The costs to manufacture and market the bicycles at the company's volume of 2,000 units per month are shown in the following table:

Unit manufacturing costs
Variable costs	$	240
Fixed overhead		121
Total unit manufacturing costs				$	361
Unit nonmanufacturing costs
Variable		60
Fixed		141
Total unit nonmanufacturing costs					201
Total unit costs				$	562

The company has the capacity to produce 2,000 units per month and always operates at full capacity. The bicycles sell for $600 per unit.

Required:

a.	KCSB receives a proposal from an outside contractor who will assemble 800 of the2,000 bicycles per month and ship them directly to KCSB