Taser Industries must decide whether to make or buy some of its components. The costs of producing 175,000 battery packs for its product are as follows: Direct Materials $15,000 Direct Labor $5,000 Variable overhead $6,000 Fixed overhead $9,000 The company has an opportunity to purchase the battery packs for $0.18 per unit, which would eliminate all variable costs, and $2,000 of fixed costs. Based on your analysis, what is the net income increase or decrease if the company purchases the battery packs?
A. an increase in net income of $3,500
B. a decrease in net income of $3,500
C. an increase in net income of $5,500
D. an increase in net income of $7,000
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