Damon Industries Manufactures 20,000 Components Per Year An Outside Supplier Has Offered to Sell the Component for the Components

Multiple Choice

Damon Industries manufactures 20,000 components per year.The manufacturing cost of the components was determined as follows:
$$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 100,000 \\\hline \text { Direct labor } & 160,000 \\\hline \text { Variable manufacturing overhead } & 60,000 \\\hline \text { Fixed manufacturing overhead } & 80,000 \\\hline\end{array}$$

An outside supplier has offered to sell the component for $17.If Damon purchases the component from the outside supplier,the manufacturing facilities would be unused and could be rented out for $10,000.If Damon purchases the component from the supplier instead of manufacturing it,the effect on income would be:

A) a $70,000 increase.
B) a $50,000 decrease.
C) a $10,000 decrease.
D) a $30,000 increase.