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Harley-Davidson uses a standard part in the manufacture of several of its motorcycles. The cost of producing 40,000 parts is $100,000, which includes fixed costs
Harley-Davidson uses a standard part in the manufacture of several of its motorcycles. The cost of producing 40,000 parts is $100,000, which includes fixed costs of $50,000 and variable costs of $50,000. The company can buy the part from an outside supplier for $4.00 per unit, and avoid 40% of the fixed costs. Assume that the Harley-Davidsons factory space freed up by purchasing the part from an outside source can be used to manufacture another product that can be sold for $32,000 profit. If Harley-Davidson buys the part, how will its operating income be affected? $92,000 greater than if the company made the part $178,000 greater than if the company made the part $58,000 less than if the company made the part $58,000 greater than if the company made the part
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