17. The following unit cost information relates to a component currently manufactured by a firm for its own use. Variabl

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17. The following unit cost information relates to acomponent currently manufactured by a firm for its ownuse.
Variable materials
£5.00
Variable labour
£2.50
Other variable overheads
£3.50
Fixed costs
£7.00
£18.00
The costs are based on a normal monthly production of50,000 components
The components could be bought in for £15.50 each, inwhich case all production capacity could be diverted to produce25.000 units per month of another product, earning a unitcontribution of £3.60 The allocated fixed overheads would becharged to this other product
If the firm decides to buy in the component rather thanmanufacture it itself, which of the following represents theoverall effect on monthly profit?
A. An increase of£365,000
B. A decrease of$335,000
C. An increase of£15.000
D. An increase of£127.500