Danyao Inc. manufactures appliance. One of their divisions manufactures a timer which are used in several of their appliances. They produce 25,000 timer units annually. The cost per unit for the timer is as follows:

Description Cost

Direct materials 7.20

Direct labour 2.40

Variable overhead 1.80

Fixed overhead 4.20

Total cost 15.60

Of the total fixed overhead assigned to the timers, $61,250 is directly attributable to the production of the timer. The remaining fixed overhead costs are common fixed overhead.

An outside supplier has offered to sell the timers to Danyao Inc. for $14.20 per unit.

Use the above information to answer all of the following questions.

Question 16(1 point)

If there was no other alternative use for the facilities that is currently used to produce the timers, should Danyao Inc. make or buy the timers?

Question 16 options:

a)

Make

b)

Indifferent

c)

Buy

Question 17(3 points)

Question 17 options:

What is the most that Danyao Inc. would be willing to pay an outside supplier for one unit of the timer?

Question 18(1 point)

If Danyao Inc. buys the timers, would their operating income increase, decrease, or stay the same?

Question 18 options:

a)

Decrease

b)

Increase

c)

Stay the same

Question 19(2 points)

Question 19 options:

If Danyao Inc. buys the timer, by how much would their operating income change?

Input your answer as a positive number.

Question 20(1 point)

If Danyao Inc. could rent out the space that is currently used to produce the timers for $15,000 per year, should the company make or buy the timers?

Question 20 options:

a)

Indifferent

b)

Buy

c)

Make

Question 21(2 points)

Question 21 options:

If Danyao Inc. buys the part and then rents out the space that is currently used to produce the timers for $15,000 per year, by how much would their operating income change?

Input your answer as a positive number.