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Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are: Direct materials Direct labor Variable manufacturing
Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total unit cost Per unit $12 8 12 8 $40 An outside supplier has offered to provide Olive Corp. with the 20,000 subcomponents at a $36 per unit price. Fixed overhead is not avoidable. If Olive Corp. rejects the outside offer, what will be the effect on short- term profits? Multiple Choice $80,000 increase no change $160,000 decrease $80,000 decrease X
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