Brown Company produces 2,000 parts per year, which are used in the assembly of one of its products. The unit product cost of these parts is:

Variable manufacturing cost $24

Fixed manufacturing cost 18

Unit product cost $42

The part can be purchased from an outside supplier at $40 per unit. If the part is purchased from the outside supplier, two thirds of the fixed manufacturing costs can be eliminated. The annual impact on Brown's net operating income as a result of buying the part from the outside supplier would be:

Practice Question 7 options:

a)$4,000 decrease

b)$8,000 decrease

c)$4,000 increase

d)$8,000 increase