A Company fabricates inexpensive automobiles for sale to 3rd world countries. Each auto includes one wiring harness, which is currently made in-house. Details of the harness fabrication are as follows:

A factory in Indonesia has offered to supply the company with ready-made units for a price of $14 each.

Assume that company?s fixed costs are unavoidable, but that company could use the vacated production facilities to earn an additional $7,500 of profit per month. What will be the impact on company?s monthly operating income, if company decides to outsource?

A) It will go up by $2,100.

B) It will go down by $14,000.

C) It will go up by $8,600.

D) It will go down by $400.

Volume Variable cost per unit Fixed costs 900 $8 $14,000 units per month per unit per month