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4. Halley Company produces 2,000 parts each year that are used in one of its products. The unit product cost of this part is: Variable
4. Halley Company produces 2,000 parts each year that are used in one of its products. The unit product cost of this part is: Variable manufacturing cost ............................ $7.50 Fixed manufacturing cost ........................... $6.00 Unit product cost ........................... $13.50 The part can be purchased from an outside supplier for $10 per unit. If the part is purchased from the outside supplier, two-thirds of the fixed manufacturing costs can be eliminated. The effect on net operating income from purchasing the part would be: a. $3,000 increase b. $1,000 decrease c. $7,000 increase d. $5,000 decrease
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