Answer the Following Questions Using the Information Below

Multiple Choice

Answer the following questions using the information below:
Donald's Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows:
It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Donald's Engine Company has the option of purchasing the part from an outside supplier at $42.50 per unit.
-If Donald's Engine Company purchases 1,000 TE456 parts from the outside supplier per month, then its monthly operating income will:

A) increase by $1,000
B) increase by $40,000
C) decrease by $1,500
D) decrease by $42,500