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Taurus Company has traditionally made a subcomponent of its major product. Annual production of 20,000 subcomponents results in the following costs: Direct materials $200,000 Direct

Taurus Company has traditionally made a subcomponent of its major product. Annual production of 20,000 subcomponents results in the following costs:

Direct materials $200,000
Direct labor $180,000
Variable manufacturing overhead $150,000
Fixed manufacturing overhead $100,000

Taurus has received an offer from an outside supplier who is willing to provide 20,000 units of this subcomponent each year at a price of $28 per subcomponent.

If Taurus decides to purchase the subcomponent from the outside supplier, how much higher or lower will net operating income be than if Taurus continued to make the subcomponent?

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