Our company produces 50,000 digital cameras per month. Each camera includes a component that we currently make in house. The variable costs to make the component are $2.40 per unit, and the fixed costs for the company are $200,000 per month.

We have been approached by a manufacturer that can supply the component with acceptable quality standards for $2.50 each. The fixed costs are unavoidable, and we would have no other use for the facilities currently employed in making the component. What is the effect on operating income if our company decides to outsource?