Sam's Manufacturing Company currently makes 100 units of a necessary component. Management is considering outsourcing this component for a cost of $1,200 per unit. Sam's incurs the following total production costs:

Direct Materials	$80,000
Direct Labor	13,000
Variable Overhead	40,000
Fixed Overhead	27,000

If production is outsourced, none of the fixed overhead costs will be eliminated. How would profits be impacted if Sam's bought the component?

		Profits would go up by $27,000
		Profits would go up by $40,000
		Profits would go up by $13,000
		Profits would go down by $40,000