Damon Industries manufactures 20,000 components per year. The manufacturing costs of the components was determined as follows:
$\begin{array}{lr}
\text { Direct materials } & \$ 100,000 \
\text { Direct labor } & 160,000 \
\text { Variable manufacturing overhead } & 60,000 \
\text { Fixed manufacturing overhead } & 80,000
\end{array}$
An outside supplier has offered to sell the component for $17. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $10,000. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
A) $70,000 increase.
B) $50,000 decrease.
C) $10,000 decrease.
D) $30,000 increase.

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The Answer of Damon Industries manufactures 20,000 components per year. The manufacturing costs of the components was determined as follows:
$\begin{array}{lr}
\text { Direct materials } & \$ 100,000 \
\text { Direct labor } & 160,000 \
\text { Variable manufacturing overhead } & 60,000 \
\text { Fixed manufacturing overhead } & 80,000
\end{array}$
An outside supplier has offered to sell the component for $17. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $10,000. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
A) $70,000 increase.
B) $50,000 decrease.
C) $10,000 decrease.
D) $30,000 increase.

Damon Industries Manufactures 20,000 Components Per Year An Outside Supplier Has Offered to Sell the Component for of the Components