The O.T. Company makes 35,000 motors to be used in the production of its sewing machines. The cost per motor at this level of activity is:

Direct materials............................................. $4.50

Direct labor.................................................. $4.60

Variable manufacturing overhead................... $3.75

Fixed manufacturing overhead....................... $3.45

An outside supplier has offered to supply all the motors the company needs for $15 each. If O.T. Company decided not to make the motors, there would be no other use for the production facilities and none of the fixed manufacturing overhead cost could be avoided. If O.T. Company decides to outsource and buy the motors, how much higher or lower would net operating income be than under the current arrangement?

a. $311,500 lower

b. $120,750 lower

c. $85,750 lower

d. $45,500 higher

e. $75,250 lower.