Clemente Inc. incurs the following costs to produce 10,000 units of a subcomponent:
Direct materials
$8,400
Direct labor
11,250
Variable overhead
12,600
Fixed overhead
16,200
An outside supplier has offered to sell Clemente the subcomponent for $2.85 a unit.
Reference: Ref 7-2
If Clemente accepts the offer, by how much will net income increase (decrease) ?
Select one:
a. $3,750
b. $19,950
c. $ (8,850)
d. $ (2,850)
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