The Kids Made Easy Ltd (KME) manufactures 20,000 nappies each period. The nappies are used as an input for producing several other products that KME manufactures (bags of 5,10,20,40). The full manufacturing costs for a batch of 100 nappies are as follows:

Direct materials	511
Direct labour	379
Variable manufacturing overhead	498
Average fixed manufacturing overhead	727
Total	2115

The fixed manufacturing overhead comprises depreciation expenses related to prior investments in facilities and equipment that are used in the manufacturing of the nappies. These assets have no other use than for the manufacturing of nappies.

An outside supplier has offered to sell KME the 20,000 nappies necessary to meet production needs this period for a lump sum of 145553. If KME accepts this outside supplier's offer, rather than manufacturing in house, the company will be:

132047 better off

145553 worse off

277447 worse off

175247 better off