Ortega Industries manufactures 16,400 components per year. The manufacturing cost of the components was determined to be as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total $ 158,000 280,000 94,000 160,000 $ 692,000 Assume Ortega Industries could avoid $60,000 of fixed manufacturing overhead if it purchases the component from an outside supplier. An outside supplier has offered to sell the component for $34. If Ortega purchases the component from the supplier instead of manufacturing it, the effect on income would be a: Multiple Choice $481,600 increase. $344,000 decrease. $34,400 increase. $206,400 increase. Damon Industries manufactures 12,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials $ 114,000 Direct labor 17,500 Variable manufacturing overhead Fixed manufacturing overhead 57,000 77,000 An outside supplier has offered to sell the component for $18. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,300. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: Multiple Choice $38,800 increase. $38,200 decrease. $73,200 increase. $16,200 decrease.