Foster Industries manufactures 20,000 components per year. The manufacturing cost of the components was determined as follws Direct materials Direct labor Inspecting products Providing power 240,000 60,000 30,000 40,000 60,000 Setting up equipment Moving materials 600,000 production costs; moving materials costs and setting up equipment costs will only be S0% of the production costs: and supervison costs will amount to only 40% of the production amount. An outside supplier has offered to sell the component for osso. What is the effect on income if Foster Industries purchases the component from the outside supplier? a. $45,000 increase Ob. $25,000 increase c. $90,000 decrease d. $90,000 increase Next Previous Miller Company produces speakers for home stereo units. The speakers are sold to retail stores for $30. Manufacturing and other costs are as follows: Variable costs per unit Direct materials Direct labor Factory overhead Fbxed costs per month: 9.00 Factory overhead 4.50 Selling and admin. 3.00 Ttal 1.50 18.00 120,000 -60,000 $180,000 Total The variable distribution costs are for transportation to the retail stores. The current production and sales volume is 20,000 per year Capacity is 25,000 units per year. o supply speakers at a cost of $17.00 per unit. If Miller Company A Tennessee manufacturing firm has offered a one-year contract t accepts the offer, it will be able to rent unused space to an outside firm for $18,000 per year. Al the original data. What is the effect on profits if Miller Company buys from the Tennessee firm? Oa. increase of $9,000 Cb, increase of $8,000 c. decrease of $6,000 d. decrease of $8,000 Previous Next All work saved