MC Qu. 12-06 A company produces a single component with...

A company produces a single component with variable and fixed production costs of $5 and $3. An external supplier has offered to sell the component to the company for $7 per unit. Assuming the company has no use for its idle capacity, what would be the effect of discontinuing production and sourcing the components from the supplier instead?

Multiple Choice

• The company will save $1 per unit.

• The company will lose $2 per unit.

• The company will save $3 per unit.

• The company will save $2 per unit.