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Olive Corporation currently makes 12,900 subcomponents a year in one of its factories. The unit...

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Accounting

Olive Corporation currently makes 12,900 subcomponents a year in one of its factories. The unit costs to produce are:

Cost per Unit
Direct materials $ 20
Direct labor 27
Variable manufacturing overhead 14
Fixed manufacturing overhead 11
Total unit cost $ 72

An outside supplier has offered to provide Olive with the 12,900 subcomponents at a $76 per-unit price. No portion of fixed overhead is avoidable. If Olive rejects the outside offer, what will be the effect on short-term profits?

Multiple Choice

$193,500 increase

no change

$141,900 decrease

$193,500 decrease

Answer & Explanation Solved by verified expert
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