Manor, Inc. currently manufactures 1,000 subcomponents per month in one of its factories. The unit costs to produce the subcomponents are:

	Per unit
Direct materials		$	50
Direct labor			150
Variable manufacturing overhead			75
Fixed manufacturing overhead			100
Total unit cost		$	375

Manor is considering purchasing the subcomponents from an outside supplier, who normally charges $300 per unit. The supplier also has an "Exclusive Buyer's Club" which costs $30,000 per month to join, but whose members can purchase the subcomponents for $250 per unit. Fixed overhead is not avoidable. If Manor chose to purchase the subcomponents using the cheaper of the two buying options, what would be the effect on profit?

Decrease $25,000

Decrease $5,000

Increase $20,000

Increase $75,000

Answer rating: 100% (QA)

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