Sam's Manufacturing Company currently makes 120 units of a necessary component. Management is considering outsourcing this component for a cost of $1,500 per unit.

Sam's incurs the following total production costs:

Direct Materials $90,000

Direct Labor 28,000

Variable Overhead 45,000

Fixed Overhead25,000

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 down by $17,000
• Profits would go down by $8,000
• Profits would go up by $25,000
• Profits would go up by $8,000