Pogue Cut Corp. makes compasses used in navigating the Outer Banks. Pogue's costs to produce 220,000 these compasses annually are: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $44,000 $66,000 $33,000 $82,000 Kie, an outside supplier has offered to sell Pogue similar compasses for $0.80 per compass. If the compass were to be purchased from Kie, the outside supplier, $37,000 of annual fixed overhead could be avoided and the facilities now being used could be rented to another company for $93,400 per year. Direct labor is a variable cost. If Pogue chooses to buy the compasses from the outside supplier, then annual net operating income would: O increase by $37,600 o increase by $44,000 O decrease by $12,000 O increase by $81,400