Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are: An outside supplier has offered to provide Olive Corp with the 20,000 subcomponents at a $36 per unit price. Fixed overhead is not avoidable. If Olive Corp rejects the outside offer, what will be the effect on short-term profits?
A) $80,000 increase
B) no change
C) $160,000 decrease
D) $80,000 decrease

Question

Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are:  An outside supplier has offered to provide Olive Corp with the 20,000 subcomponents at a $36 per unit price. Fixed overhead is not avoidable. If Olive Corp rejects the outside offer, what will be the effect on short-term profits?
A) $80,000 increase 
B) no change 
C) $160,000 decrease 
D) $80,000 decrease

Quizplus · Accepted Answer

The Answer of Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are:  An outside supplier has offered to provide Olive Corp with the 20,000 subcomponents at a $36 per unit price. Fixed overhead is not avoidable. If Olive Corp rejects the outside offer, what will be the effect on short-term profits?
A) $80,000 increase 
B) no change 
C) $160,000 decrease 
D) $80,000 decrease