Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $3.00 and $3.50 respectively. Normal production is 200,000 wheels per year. A supplier offers to make the wheels at a price of $9 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the $64,000 of fixed manufacturing overhead currently being charged to the wheels will have to be absorbed by other products. How much would net income decrease by if the company chose to purchase the wheels instead of making the wheels? Instruction: Please do not add comma, cents or dollar sign in your answer.
Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing
Instruction: Please do not add comma, cents or dollar sign in your answer.
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