Question
Flag question: Question 22 Question 223 pts Ortega Industries manufactures 15,000 components per year. The manufacturing cost of the components was determined to be as
Flag question: Question 22
Question 223 pts
Ortega Industries manufactures 15,000 components per year. The manufacturing cost of the components was determined to be as follows:
Direct materials | $ | 150,000 | |
Direct labor | 240,000 | ||
Variable manufacturing overhead | 90,000 | ||
Fixed manufacturing overhead | 120,000 | ||
Total | $ | 600,000 |
Assume Ortega Industries could avoid $40,000 of fixed manufacturing overhead if it purchases the component from an outside supplier. An outside supplier has offered to sell the component for $34. If Ortega purchases the component from the supplier instead of manufacturing it, the effect on income would be a:
Group of answer choices
$60,000 increase.
$10,000 increase.
$100,000 decrease.
$140,000 increase
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started