Damon Industries manufactures 10,000 components per year. The manufacturing costs of the components was determined as follows: Direct materials $ 104,000 Direct labor 15,500 Variable manufacturing overhead 55,000 Fixed manufacturing overhead 75,000 An outside supplier has offered to sell the component for $20. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,100. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:
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Home » Business » Damon Industries manufactures 10,000 components per year. The manufacturing costs of the components was determined as follows: Direct materials $ 104,000 Direct labor 15,500 Variable manufacturing overhead 55,000 Fixed manufacturing overhead 75,000