Question: A company produces a single component with variable and fixed production costs of $5 and $3. An external supplier has offered to sell the component

A company produces a single component with variable and fixed production costs of $5 and $3. An external supplier has offered to sell the component to the company for $9 per unit. Assuming the company has no use for its idle capacity, what would be the effect of discontinuing production and sourcing the components from the supplier instead?

a)the company will save $1 per unit

b)the company will lose $4 per unit

c) the company will save $3 per unit

d) the company will save $2 per unit

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