#14

Parton Company, a manufacturer of snowmobiles, is operating at 70% of plant capacity. Parton's plant manager is considering making the headights now being purchased from an outside supplier for $11.00 each. The Payton plant has idle equipment that could be used to manufacture the headlights. The design engineer estimates that each headight requires $4.00 of direct materials, $3.00 of direct labor, and $6.00 of manufacturing overhead. Forty percent of the manufacturing overhead is a fixed cost that would be unaffected by this decision. A decision by Parton Company to manufacture the headlights should result in a net gain (loss) for each headlight of: (CMA adapted) Multiple Choice $(2.00) $1.60. $0.40. $280 outside supplier? Multiple Choice Net operating income would decline by $38,900 per yeat. Net operating income would increase by $29,000 per year. Net operating income would decline by $32,600 per year. Net operating income would increase by $19.100 per yeat