Hadley Inc. makes a line of bathroom accessories. Because of a decline in sales the company has 10000 machine hours of idle capacity available each year.
This idle capacity could be used by the company to make rather than buy one of the components used in its production process. Hadley needs 5000 units of
this component each year. At present the component is being purchased from an outside supplier at $7.50 per unit. Variable production cost for the component
would be $4.10 per unit and additional supervisory costs would be $18000 per year. Already existing fixed costs that would be allocated to this part amount
to $300000 per year.
If the company decides to make the component the overall annual net operating income that would result from making the component rather than buying it would