Make-or-Buy Decision Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $27 each. Zion uses 12,500 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials $12.00 Direct labor 8.25 Variable overhead 4.50 Fixed overhead Total 6.00 $30.75 Assume that 75% of Zion Manufacturing's fixed overhead for Component K2 would be eliminated if that component were no longer produced. Required: 1. CONCEPTUAL CONNECTION: If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Which alternative is better?