Question
DC Electronics uses a standard part in the manufacture of several of its radios. The cost of producing 30,000 parts is $90,000, which includes fixed
DC Electronics uses a standard part in the manufacture of several of its radios. The cost of producing 30,000 parts is $90,000, which includes fixed costs of $33,000 and variable costs of $57,000. The company can buy the part from an outside supplier for $2.50 per unit, and avoid 30% of the fixed costs. Assume that factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can earn profit of $11,600. If DC outsources, what will the effect on operating income be? 12) A) Up $3,400 B) Down $24,900 C) Down $13,300 D) Up $15,000
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