Part O43 is used in one of Scheetz Corporation's products. The company'sAccounting Departmentreports the following costs of producing the 16,200 units of the part that are needed every year.

Per UnitDirect materials$3.10Direct labor$4.10Variable overhead$6.90Supervisor's salary$7.40Depreciation ofspecial equipment$8.50Allocated general overhead$5.60

An outside supplier has offered to make the part and sell it to the company for $30.00 each. If this offer isaccepted, 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 nosalvagevalue or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $22,200 of these allocated general overhead costs would be avoided.

Required:

a.Prepare a report that shows the effect on the company's total net operating income of buying part O43 from the supplier rather than continuing to make it inside the company.(Inputthe amount as a positive value. Omit the "$" sign in your response.)

Net operating income would be(Click to select)

decrease

increase

by $.

b.Which alternative should the company choose?

BuyMake