Question 8 refers to the following:

Wintertime Company produces the handles which are used in the production of their snow shovels. Wintertimes costs to produce 100,000 handles annually are as follows:

Direct materials $45,000

Direct labor 35,000

Variable overhead 22,000

Fixed overhead 53,000

TOTAL $155,000

An outside supplier has offered to sell Wintertime similar handles for $1.40 per handle. If the handles are purchased from the outside supplier, $35,000 of annual fixed factory overhead will continue, and the facilities now being used to make the handles could be rented to another company for $65,000 per year.

8. If Wintertime chooses to buy the handles from the outside supplier, then the change in annual net income due to accepting the offer is a:

a. $80,000 decrease.

b. $35,000 increase.

c. $45,000 increase.

d. $62,000 increase.