Clifford, Inc. currently manufactures 1,500 subcomponents in one of its factories. The current unit costs to produce the subcomponents are:

	Per unit
Direct materials	$	49
Direct labor		42
Variable manufacturing overhead		57
Fixed manufacturing overhead		133
Total unit cost	$	281

Due to a labor strike, Clifford is considering purchasing the subcomponents from an outside supplier for $380 per unit rather than paying the 10% increase in direct labor costs demanded by the union. Fixed overhead is not avoidable. If Clifford purchases the subcomponent from the outside supplier, how much will profit differ from what it would be if it manufactured the subcomponents with the increase in direct labor cost? (Do not round intermediate calculations.)

Multiple Choice

• $199,500 less

• $1,480,000 less

• $341,700 less

• $1,480,000 more