Olive Corp currently makes 11,700 subcomponents a year in one of its factories The unit costs to produce are Per unit Direct materials $ 29 Direct labor 22 Variable manufacturing overhead 19 Fixed manufacturing overhead 9 Total unit cost $ 79 An outside supplier has offered to provide Olive Corp with the 11,700 subcomponents at an $83 per unit price Fixed overhead is not avoidable If Olive Corp accepts the outside offer, what will be the effect on short term profits

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Question: Olive Corp. currently makes 11,700 subcomponents a year in one of its factories. The unit costs to produce are: Per unit Direct materials $ 29

Olive Corp. currently makes 11,700 subcomponents a year in one of its factories. The unit costs to produce are:

	Per unit
Direct materials		$	29
Direct labor			22
Variable manufacturing overhead			19
Fixed manufacturing overhead			9
Total unit cost		$	79

An outside supplier has offered to provide Olive Corp. with the 11,700 subcomponents at an $83 per unit price. Fixed overhead is not avoidable. If Olive Corp. accepts the outside offer, what will be the effect on short-term profits?

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