The Talbot Corporation makes wheels that it uses in the production of bicycles. Talbot's costs to produce 100,000 wheels annually are:

Direct materials	$30,000
Direct labor	$50,000
Variable manufacturing overhead	$20,000
Fixed manufacturing overhead	$70,000

An outside supplier has offered to sell Talbot similar wheels for $1.25 per wheel. If the wheels are purchased from the outside supplier, $15,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $45,000 per year. Direct labor is a variable cost. If Talbot chooses to buy the wheel from the outside supplier, then annual net operating income would:

A) decrease by $10,000.

B) increase by $35,000.

C) increase by $45,000.

D) increase by $70,000.