Damon Industries manufactures 30,000 components per year. The manufacturing costs of the components was determined as follows:

Direct materials	$	150,000
Direct labor		170,000
Variable manufacturing overhead		70,000
Fixed manufacturing overhead		90,000

An outside supplier has offered to sell the component for $14. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,000. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a:

• $19,000 decrease

• $41,000 increase

• $49,000 decrease

• $89,000 increase