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Question - Puglia Global produces air conditioners. One electrical component that Puglia Global directly manufactures to use in the air conditioners has total costs of £60,000 for 20,000 units, including fixed costs of £30,000.
A supplier is now offering the same electrical component at a price of £2.50. If Puglia Global buys from this outside supplier, it can save 75% of the fixed costs.
If Puglia Global decides to outsource the production of the electrical component, what is the effect on its profit?
a) Decrease by £500
b) Increase by £2,500
c) Increase by £7,500
d) Decrease by £2,500
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