Damon Industries manufactures 12,000 components per year. Th…
Damon Industries manufactures 12,000 components per year. The manufacturing costs of the components were determined as follows: Direct materials $ 114,000 Direct labor 17,500 Variable manufacturing overhead 57,000 Fixed manufacturing overhead 77,000 An outside supplier has offered to sell the component for $18. If Damon purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $11,300. If Damon purchases the component from the supplier instead of manufacturing it, the effect on operating profits would be a: