Valuable Electronics uses a standard part in the manufacture of different types of radios manufactured by it
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Question:
Valuable Electronics uses a standard part in the manufacture of different types of radios manufactured by it The total cost of producing 25,000 parts is $95,000, which includes fixed costs of $40,000 and variable costs of $55,000. The company can buy the part from an outside supplier for $3 per unit, and avoid 20% of the fixed costs. Assume that free factory space can be used to manufacture another product that can earn profit of $15,000.
If Valuable outsources, what will be the effect on operating income?
A) Increase of $12,000
B) Decrease of $12,000
C) Increase of $20,000
D) Decrease of $20,000
Related Book For
Statistics for Business and Economics
ISBN: 978-0134506593
13th edition
Authors: James T. McClave, P. George Benson, Terry Sincich
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