COD Company has always made its electronic components that go into their GPS systems in-house. Streeter Company has offered to supply these electronic components at a price of $38 each. COD Company uses 18,000 units of these components each year. The cost per unit of this component is as follows:

Direct material $13.75 Direct labor $16.00 Variable overhead $7.00 Fixed overhead $8.25 Total $45.00 Assume that of COD Company's fixed overhead would be eliminated if the electronic component was no longer produced in-house. Instructions:

a) If COD Company decided to purchase the electronic component from Streeter Company by how much would its operating income is affected? (8 marks)

b) Should COD Company continue to make the electronic component or buy it from Streeter Company? (2 marks)