Olive Corp

Multiple Choice

Olive Corp. currently makes 20,000 subcomponents a year in one of its factories. The unit costs to produce are: An outside supplier has offered to provide Olive Corp with the 20,000 subcomponents at a $36 per unit price. Fixed overhead is not avoidable. If Olive Corp accepts the outside offer, what will be the effect on short-term profits?

A) $160,000 decrease
B) $320,000 increase
C) $160,000 increase
D) $80,000 decrease