Matahari Makan Sdn Bhd manufactures and sells wall-mounted ovens to the public. Currently they sell 20,000 ovens per year. One major component in any oven to regulate temperatures is the thermostat. The company has approached you for help in deciding if they should continue to manufacture their own thermostats or if they should outsource this component.

The following are costs associated with the manufacture of 20,000 thermostats.

Direct Materials $17 per thermostat

Direct Labour 4x full time employees (1,920 hours each per year) @ $28/hr

Machining Costs $80,000

Fixed Overheads $160,000

Precisetronics Ltd has offered to supply the thermostats for $32 each plus a delivery fee of $11,000 for each shipment of 20,000. Analysis has found that if the thermostats are outsourced, Matahari Makan would eliminate $35,000 of fixed overheads. They would only need to keep one full-time employee to continue to fit the thermostats into the ovens.

If Matahari Makan decides to outsource the thermostats, how much better-off (Or worse-off) will they be?