Bumper Pump manufacturers pumps for use in rural irrigation systems. The company manufacturers 20,000 pumps annually...

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Bumper Pump manufacturers pumps for use in rural irrigation systems. The company manufacturers 20,000 pumps annually with each pump containing several key operating parts. An outside vendor has approached Bumper offering to sell a key part for $29.00. If Bumper chose to buy the part from the outside vendor, they believe that they could rent the space currently utilized to produce the part to another company for $60,000 per year. Annual production costs for the part are as follows: Direct materials $10.00 Direct labor Variable overhead Fixed overhead 7.50 5.00 If Bumper decides to purchase the part from the outside vendor, what will be the effect on the company's operating income? $10,000 increase 9.00 $45,000 decrease O $50,000 increase $50,000 decrease Bumper Pump manufacturers pumps for use in rural irrigation systems. The company manufacturers 20,000 pumps annually with each pump containing several key operating parts. An outside vendor has approached Bumper offering to sell a key part for $29.00. If Bumper chose to buy the part from the outside vendor, they believe that they could rent the space currently utilized to produce the part to another company for $60,000 per year. Annual production costs for the part are as follows: Direct materials $10.00 Direct labor Variable overhead Fixed overhead 7.50 5.00 If Bumper decides to purchase the part from the outside vendor, what will be the effect on the company's operating income? $10,000 increase 9.00 $45,000 decrease O $50,000 increase $50,000 decrease

Answer rating: 100% (QA)

In the scenario presented Bumper Pump is considering whether to purchase a key part from an outside vendor for 2900 each rather than manufacturing the ... View the full answer