Sheridan Company incurs the following costs to produce 12400 units of a subcomponent: Direct materials $10416 Direct labor 14012 Variable overhead 15624 Fixed overhead 16200 An outside supplier has offered to sell Sheridan the subcomponent for $2.85 a unit.

If Sheridan accepts the offer, by how much will net income increase (decrease)?

$4712

$20912

$(10912)

$(3596)