Part E$43$ is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the $14,000$ units of the part that are needed every year.

Per unit

Direct materials.........................................$$4\mathrm{.}50$

Direct labor.................................................... $1\mathrm{.}20$

Variable overhead....................................... $2\mathrm{.}70$

Supervisor's salary..................................... $3\mathrm{.}00$

Depreciation of special equipment..... $2\mathrm{.}30$

Allocated general overhead................... $1\mathrm{.}80$

An outside supplier has offered to make the part and sell it to the company for $$18\mathrm{.}79$ each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $$7,500$ of these allocated general overhead costs would be avoided. In addition, the space used to produce part E$43$ could be used to make more of one of the company$$s other products, generating an additional segment margin of $$85,100$ per year for that product.

Required:

a$.$ Prepare a report that shows the effect on the company's total net operating income of buying part E$43$ from the supplier rather than continuing to make it inside the company.

b$.$ Which alternative should the company choose?