Reference no: EM133096848

Question - Sorin Drones makes and sells autonomous drones for monitoring large agricultural and tree farms. For 2022, Sorin Drones estimates that it will sell 20,000 units of its single drone model.

The company assembles the cameras installed on the drones at a small specialized facility next to its main campus. The company is evaluating the possibility of buying cameras instead of making them internally. An outside supplier offered to provide the company fully assembled cameras of identical quality and functionality for $135 per unit; the outside supplier is able to meet Sorin's entire estimated 2022 requirements of 20,000 cameras.

Cost information about internal production of cameras is available from Sorin Drones' "textbook" normal absorption costing system:

Direct Materials (DM)	$83
Direct Labor (DL)	16
Overhead (VOH)	13
Fixed Overhead (FOH)	45
	$157

Note: FOH is allocated to cameras using estimated camera units made. Sorin analysts estimate that 45% of the FOH allocated to the cameras will be avoided if production is outsourced to the outside supplier. Also, if production is outsourced to the outside supplier, Sorin will be able to reduce its annual depreciation expense by $70,000.

Required - What is the estimated change in Sorin's NOI if the cameras are outsourced to the outside supplier?