What is the correct answer and how?

Refer to Clear Sailing Lifeboats. If the company chooses to make the component instead of buying it from an outside supplier, the changes in the company's net income per year would be a

a. $6,000 decrease.

b. $6,000 increase.

c. $8,400 decrease.

d. $8,400 increase.

20. Clear Sailing Lifeboats uses 12,000 units of a certain component in production each year. Presently, this component is purchased from an outside supplier at $9.50 per unit. For some time now there has been idle capacity in the factory that could be utilized to make this component. The costs associated with manufacturing the component internally rather than buying it from the outside supplier are Direct materials Direct Labor Variable Overhead Fixed Overhead (based on production of 8,000 units per month) Annual salary of new supervisor $3 per unit $3 per unit $2 per unit $2 per unit $24,000