The Talbot Company produces wheels which are used in the production of bicycles. Talbot's costs to produce 100,000 wheels antally are. Direct Materials $30,000 Direct Labor 50,000 Variable Overhead 20,000 Fixed Overhead 70,000 Total $170.000 An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $55,000 of annual fixed factory overhead will continue to be incurred and will be allocated to other products. The facilities now being used to make the wheels could be rented to another company for $45,000 per year if the wheels are purchased from the outside supplier. If Talbot chooses to buy the wheel form the outside supplier, then the change in annual net income due to accepting the offer is a: a. $45,000 Increase O b. $35,000 Increase O c. $70,000 Increase d. $10,000 Decrease The following data for Simonons Company applies to questions 9 and 10: Simmons Company produces a single product. The cost of producing and selling a single unit of this product at the company's nomal activity level of 60,000 units per year is. Direct Materials $5.30 Direct labor 4.20 Vanable Overhead 1.25 Variable selling and administrative expense 1.75 Fixed Overhead 1.15 Fixed selling and administrative expense 1.40 The normal selling price is $20 per unit. The company's capacity is 75,000 units per year. An order has been received from a mail-order house for 15,000 units at a special price of $15.50 per unit. This order would not disturb regular sales. Variable selling and administrative costs will be the same for this order as for regular sales orders. If the order is accepted, by how much will annual profits be increased or decreased? (The order will not change the company's total fixed costs.) a. $71,250 Decrease b. $45,000 Increase O c. $45,000 Decrease O d. $71,250 Increase