Cox Engineering performs cement core tests in its laboratory. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor-hours. The following standards for variable manufacturing overhead have been set for each core test performed: Standard Rate Standard Hours $8 per hour .0.4 hours per test performed The information for July is as follows: Actual number of tests performed Actual direct labor hours worked.... 1,800 tests performed .840 direct labor hours Actual variable manufacturing overhead incurred. $3,200 The variable overhead efficiency variance for July is: $960 unfavorable $640 unfavorable $960 favorable $640 favorable Fillip Corp. makes 3,800 units of part U1 each year. The unit costs of producing the part at 3,800 units are as follows: $6.10 $4.50 $6.80 Direct materials Direct labor Variable manufacturing overhead Supervisor's salary Depreciation of special equipment Allocated general overhead $2.50 $8.60 $7.00 An outside supplier has offered to sell the part to the company for $21.80 each. If this offer is accepted, then: the supervisor's salary and all of the variable costs would be avoided, The allocated general overhead costs would not be avoided even if the company buys part U1 from the outside supplier, and the depreciation expense of the special equipment used to make the part will not be avoided even if the company buys part U1 from the outside supplier. If the company buys part U1 from the supplier, what would be the impact on the company's net operating income? Net operating income would decrease by $16,720. Net operating income would decrease by $7.220. Net operating income would increase by $7,220 Net operating income would increase by $16,720