Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows:

Direct material	$ 40,000
Direct labor	$ 60,000
Unit level manufacturing overhead	$ 30,000
Fixed manufacturing overhead	$ 70,000
Total	$200,000

An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year. If Talboe chooses to buy the wheel from the outside supplier, then the change in annual net operating income is a:

Talboe Company makes wheels which it uses in the production of children's wagons. Talboe's costs to produce 200,000 wheels annually are as follows: Direct material $ 40,000 Direct labor $ 60,000 Unit level manufacturing overhead $ 30,000 Fixed manufacturing overhead $ 70,000 Total $200,000 An outside supplier has offered to sell Talboe similar wheels for $0.80 per wheel. If the wheels are purchased from the outside supplier, $25,000 of annual fixed manufacturing overhead would be avoided and the facilities now being used to make the wheels would be rented to another company for $55,000 per year. If Talboe chooses to buy the wheel from the outside supplier, then the change in annual net operating income is a: Multiple Choice $5,000 decrease $70,000 increase $40,000 increase $50,000 increase