11. M Corporation makes automobile engines. The company's records show the following costs to

manufacture part #308FD:

Direct Materials

$13

Direct Labor

$15

Variable Overhead

$20

Fixed Overhead

$10

Another manufacturer has offered to supply M Corporation with part #308FD for a cost of $50 per unit. M Corporation uses 1,000 units annually. If M Corporation accepts the offer, what will be the short-run impact on operating income? (20 points)

a.

Decrease in profits equal to $8,000.

b.

Decrease in profits equal to $2,000.

c.

Increase in profits equal to $8,000.

d.

Increase in profits equal to $2,000.