The Iberia Tire Company has 3,000 tires in its inventory which are considered obsolete. Each tire originally cost the company $35 and the normal selling price was $45 per tire. Management is considering two options to reduce these inventory levels. Option one is to sell the tires directly to car dealerships for $30 per tire. Option two is to sell the tires to customers for $35 per tire but this option would require advertising costing an additional $24,000 to advertise the sale. They predict that either option will rid them completely of their excess inventory. If management decides to go with Option one, the difference in profits relative to Option two is (provide the amount of the difference and circle whether Option one results in higher or lower profits):

Option 1 vs. Option 2 Difference Higher / Lower (circle or highlight one)

Barrus Corporation makes 30,000 motors to be used in the productions of its power lawn mowers. The average cost per motor at this level of activity is as follows:

Direct Materials $9.50

Director Labor $8.60

Variable manufacturing overhead $3.75

Fixed manufacturing overhead $4.35

This motor has recently become available from an outside supplier for $25 per motor. If Barrus decides not to make the motors, none of the fixed manufacturing overhead would be avoidable and there would be no other use for the facilities. If Barrus decides to continue making the motor, how much higher or lower will the company's net operating income be than if the motors are purchased from the outside supplier? Assume that direct labor is a variable cost in this company. Provide the amount difference and whether the choice to purchase from the outside supplier results in higher or lower profits. $94,500 Purchase vs. Make Difference Higher / Lower circle or highlight one)