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
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.
If Valuable Electronics decides to outsource the production of the part, how will it impact its operating income?
A) Increase of $12,000
B) Decrease of $12,000
C) Increase of $20,000
D) Decrease of $20,000
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Get StartedRecommended Textbook for
Statistics For Business And Economics
Authors: James T. McClave, P. George Benson, Terry Sincich
13th Edition
134506596, 978-0134506593
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