Miller Company Produces Speakers for Home Stereo Units A)a Decrease of $6,000
B)a Decrease of $19,000
C)an Increase

Multiple Choice

Miller Company produces speakers for home stereo units.The speakers are sold to retail stores for $30.Manufacturing and other costs are as follows: The variable distribution costs are for transportation to the retail stores.The current production and sales volume is 20,000 per year.Capacity is 25,000 units per year.
A manufacturing firm has offered a one-year contract to supply speaker parts at a cost of $17.00 per unit.If Miller Company accepts the offer,it will be able to rent unused space to an outside firm for $18,000 per year.All other information remains the same as the original data.What is the effect on profits if Miller Company buys from the firm?
$\begin{array}{llr}\text { Variable costs per unit: } &&{\text { Fixed costs per month: }} \\\text { Direct materials } & \$ 9.00& \text { Factory overhead } & \$ 120,000 \\\text { Direct labour } & 4.50& \text { Selling and administrative } & 60,000 \\\text { Factory overhead } & 3.00 &\text { Total } & \$ 180,000\\\text { Distribution } & 1.50 \\\text { Total } & \$ 18.00\end{array}$

A) a decrease of $6,000
B) a decrease of $19,000
C) an increase of $19,000
D) an increase of $38,000