Carver Company manufactures a component that is used in the manufacture of one of its main products. The following cost information is available:

Direct materials: $410
Direct labor (variable): $110
Variable production overhead: $90
Fixed production charge: $30

A supplier offered to sell the component to Carver for $650 per unit. If Carver purchases the component from the supplier, the released facilities can be used to produce a product that will generate an annual contribution margin of $20,000. 

Assuming Carver needs 3,000 components per year and a constant production load is unavoidable, what would be the impact on operating income if Carver outsourced?

Answer rating: 100% (QA)

To determine the impact on operating income if Carver outsources the component we need to compare th... View the full answer